EU commission to outline plans for political union
22.05.12 @ 17:16
BRUSSELS - The European Commission has said it will soon bring forward plans for an economic and political union it says is necessary for the creation of debt-mutualising eurobonds - one of the most controversial proposed solutions to the current eurozone crisis.
"We need to reflect what kind of European union would be required to deepen economic and political integration, for instance so that joint issuance of debt would make sense for all member states sharing the single currency," economics commissioner Olli Rehn told MEPs on Tuesday (22 May).
He said the commission would "soon" come up with a "medium to long term roadmap" outlining the necessary deeper fiscal and economic integration that would minimise moral hazard - member states running up debt because they know it will be paid by others - and ensure "fiscal sustainability."
"In other words," the commissioner added, "the features of an economic and political union required to make mutualisation rational for all."
With his statement, Rehn has put the eurobonds issue firmly back on the table just ahead of a meeting of EU leaders in Brussels on Wednesday (23 May) to discuss growth strategies for Europe.
The commission first published an ideas paper on various types of eurobonds in November last year. The paper was immediately shot down by Germany, the eurozone's paymaster.
Germany remains firmly against the idea arguing that too many other elements - such as guaranteed fiscal discipline - have to be in place before it can be discussed.
But the election of Socialist Francois Hollande as president of France earlier this month has altered the nature of the policy debate in Europe, taking it away from a one-dimensional focus on austerity towards a discussion that includes ideas to stimulate economic growth.
Hollande has said he will raise the issue of eurobonds with German Chancellor Angela Merkel during Wednesday's summit. German officials have countered that the idea is "not a legitimate theme" for the meeting.
The summit has been billed by EU president Herman Van Rompuy - who has in the past also said that mutualisation of euro debt must be discussed - as a no-decisions but no-taboos get-together.
Meanwhile, the institutional changes implied by Rehn's statement to MEPs have a potentially more receptive audience in Germany and beyond.
Last week, German finance minister Wolfgang Schaeuble said the European Commission should be the government of Europe and its president should be directly elected.
The eurozone crisis has made erstwhile foes of further EU integration think twice as well.
Britain, outside the euro and one of its more sceptical members, has also started making public statements about the need for fiscal and political union, with many arguing that the eurozone's woes have been exacerbated by the fact that the EU lacked the tools - such as a central transfer system - to effectively deal with it.