Brussels blog

Merkel and Sarkozy at their post-summit news conference Tuesday evening in Paris

The letter Nicolas Sarkozy and Angela Merkel sent yesterday to the president of the European Council, Herman Van Rompuy, contains a lot of ideas that have been discussed previously in Brussels and not gone very far, raising questions as to how much of the new Franco-German agenda can actually be implemented.

But reading between the lines of the letter, one theme that has gone almost unnoticed is the seeming sidelining of the institution that is supposed to be at the centre of European integration: the European Commission, the EU’s executive branch headed by José Manuel Barroso.

Suggesting that Van Rompuy head regular summits of eurozone heads of state as “the cornerstone of the enhanced economic governance of the euro area” is only part of the seemingly anti-Commission tenor of the plan.

German officials say they would also back a new secretariat to support both Van Rompuy’s eurozone role and to “reinforce” the activities of the so-called “euro group” – the 17 eurozone finance ministers.

Although Olli Rehn, the Commission’s economic chief, attends the euro group meetings – which are almost always held the evening before more formal gatherings of all 27 EU finance ministers – his role is not legally defined as it is when the 27 ministers meet in their role as the EU’s economic and financial affairs council.

In addition, the Sarko-Merkel letter calls for “new analytical capacities” for the €440bn eurozone bail-out fund, which is rapidly gaining all the trappings of a federal eurozone debt agency. The two leaders explicitly say in the letter that the new staff would “compliment the analysis and recommendations” by the Commission, essentially creating another EU power centre when it comes to economic matters.

All this may seem like a bunch of Brussels inside baseball, but it could have a significant impact on the way an economic union is governed in the future. The whole idea behind the creation of the Commission and the so-called “community method” was to have a nominally unbiased and technocratic international institution that could rise above the interests of individual nation states.

A process that cuts the Commission out for a more intergovernmental approach would naturally give more power to the bigger member states – like France and Germany – whose leaders have clashed with Barroso with some regularity in recent months.

Commission officials acknowledge a bit of German-led Commission bashing is going on, which they see as a prerequisite to getting domestic support for more EU economic federalism. “We are moving towards a much further and deeper economic integration and that’s very difficult for the Germans,” said one senior Commission official. “The Germans want to be able to show this process is an intergovernmental one.”

But given the amount of work involved in creating a closer fiscal and economic union, the Commission is currently the only EU institution with the bureaucratic firepower to do the hard work involved, the official insisted. “You can’t do this without the Commission,” he said.

In addition, there are certainly parts of the Franco-German plan where the Commission would have to play a central role. The letter calls for all eurozone countries to “confirm without delay” EU recommendations for economic reforms – recommendations made just last month by the Commission as part of its new annual “European Semester” process.

In addition, under the Franco-German plan the Commission would get new powers to police eurozone members’ use of EU development funds, deciding whether they are being properly used by countries in bail-outs – and if not, stripping the money and putting it in a new “fund for growth and competitiveness” which would be administered by the Commission.

Regardless, the creation of new governance structures for a putative economic union is likely to be quite fraught and one that could lead to some nasty institutional fights.