Friday

22nd Nov 2019

Draghi: euro countries to lose even more sovereignty

  • Draghi is the father of the 'fiscal compact' but has now the 'growth compact' as well (Photo: The Council of the European Union)

European Central Bank (ECB) chief Mario Draghi has urged eurozone leaders to come up with a 10-year target for the common currency, saying they should accept more transfer of powers if they truly want a fiscal union.

Held exceptionally in Barcelona instead of the ECB headquarters in Frankfurt, the monthly meeting of eurozone's central bank governing council on Thursday (3 May) was an opportunity for Draghi to explain what he meant last week when he said a "growth compact" is needed along with the deficit-cutting measures taken by most governments.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 year's of archives. 30-day free trial.

... or join as a group

"There is absolutely no contradiction between a growth compact and a fiscal compact," the Italian banker said in reference to the treaty on fiscal discipline signed in March by 25 EU leaders.

Draghi himself had earlier coined the "fiscal compact" moniker.

He went on to explain that governments have to stick to tighter budgets, while reforming labour markets, increasing competition, re-balancing employment towards young people.

"I can understand the anger of young people, of poor and jobless young people. I can understand it very well. The answer we can give as policy makers is that the policies suggested or implemented are the policies we are convinced to be the right ones."

Also part of his vision of a "growth compact," Draghi backed calls for a boost in the resources of the European Investment Bank and said EU funds needed to be "redirected" to low-income areas - ideas already floated by Francois Hollande, the frontrunner in the Sunday presidential elections in France.

"But the thirdly and most importantly is that we collectively have to specify a path for the euro. How do we see ourselves in 10 years from now ...We want to have a fiscal union? We have to accept the delegation of fiscal sovereignty from national to some form of central [government]," he said.

In getting there, politicians should however refrain from talking about a "transfer union" as a starting point, he said, in reference to richer countries automatically paying for poorer ones, a concept most loathed by Germany and its independence-wary Bundesbank.

"That is why the fiscal compact is so important, that is the starting point," Draghi noted.

For its part, Fitch ratings agency published a report outlining five possible scenarios for the future of the eurozone: a "Greek Exit;" a "Quasi-Fiscal Union;" the "Euro-mark" where Germany and a "core" exit leaving the remaining countries with the euro; the "United States of Europe;" and a "Full Break Up."

A full break-up and the demise of the euro is very unlikely, Fitch said in a press statement, given the huge financial and political costs.

"Even a partial 'break-up' involving the exit of one or more so-called peripheral nations would risk severe systemic damage, although cannot be discounted. The likelihood of a move to full fiscal union in the near term is also very small, as in Fitch's view, the political will for it does not exist."

Instead, the eurozone will continue to "muddle through," the ratings agency predicted, agreeing with Draghi that "some dilution of national fiscal sovereignty" was still to come.

Of the five scenarios, "Fitch believes that a Greek exit is the most likely", it added.

In this case the southern country would have to re-denominate its debt and default again. That would lead Fitch to downgrade Cyprus, Ireland, Italy, Portugal and Spain "owing to the 'exit precedent' of Greece and risk of contagion to banks, bond markets and capital flight," it explained, just three days ahead of general elections in Greece.

Interview

EU Africa envoy: Europe needs to look beyond migration

Europe's obsession with migration from Africa means it risks losing out the continent's potential when it comes to trade, says the EU's ambassador to the African Union, Ranier Sabatucci. "Africa is a growing continent, it is the future," he says.

EU agrees 2020 budget deal

EU governments and the parliament agreed in marathon talks ino next year's budget - which will boost spending on climate, border protection, and the European satellite system. It will also be a benchmark if there is no long-term budget deal.

EU and China agree to defend 'gastronomic jewels'

Manchego cheese, Panjin rice and Polish vodka will all be protected under a new EU-China agreeement. But the two trading giants continue to struggle over other trade-related deals.

News in Brief

  1. EU parliament votes on new commission next week
  2. Berlusconi wants Europe to be a military global power
  3. Orban ordered to apologise over 'misleading' Soros survey
  4. EPP to decide on expelling Fidesz by end of January
  5. Rowdy anti-corruption protest in Malta
  6. Ambassador: Trump ordered Ukraine election meddling
  7. EU links Libyan government to human trafficking
  8. Greek PM on migration: 'Greece has reached its limits'

Opinion

Why von der Leyen must put rights at core of business

Ursula von der Leyen's in-tray must include those European executives on trial for systematic workplace harassment, the break-up of European slavery rings, and allegations of European companies' abuse in palm oil, including child labour, land grabs, and deforestation.

Stakeholders' Highlights

  1. Nordic Council of MinistersEarmarked paternity leave – an effective way to change norms
  2. Nordic Council of MinistersNordic Climate Action Weeks in December
  3. UNESDAUNESDA welcomes Nicholas Hodac as new Director General
  4. Nordic Council of MinistersBrussels welcomes Nordic culture
  5. UNESDAUNESDA appoints Nicholas Hodac as Director General
  6. UNESDASoft drinks industry co-signs Circular Plastics Alliance Declaration
  7. FEANIEngineers Europe Advisory Group: Building the engineers of the future
  8. Nordic Council of MinistersNew programme studies infectious diseases and antibiotic resistance
  9. UNESDAUNESDA reduces added sugars 11.9% between 2015-2017
  10. International Partnership for Human RightsEU-Uzbekistan Human Rights Dialogue: EU to raise key fundamental rights issues
  11. Nordic Council of MinistersNo evidence that social media are harmful to young people
  12. Nordic Council of MinistersCanada to host the joint Nordic cultural initiative 2021

Latest News

  1. EPP congress pledges 'moderate' climate solution
  2. EPP wants to re-open accession talks with Balkans
  3. New EU financial instruments needed
  4. Binding measures to expand gender balance
  5. Watershed moment for rule of law in Hong Kong
  6. EU Africa envoy: Europe needs to look beyond migration
  7. New calls for Muscat to resign over journalist's murder
  8. Tusk pledges 'fight' for EU values as new EPP president

Stakeholders' Highlights

  1. Vote for the EU Sutainable Energy AwardsCast your vote for your favourite EUSEW Award finalist. You choose the winner of 2019 Citizen’s Award.
  2. Nordic Council of MinistersEducation gets refugees into work
  3. Counter BalanceSign the petition to help reform the EU’s Bank
  4. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  5. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness
  6. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  7. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat
  8. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North
  9. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate
  10. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody
  11. Platform for Peace and JusticeMEP Kati Piri: “Our red line on Turkey has been crossed”
  12. UNICEF2018 deadliest year yet for children in Syria as war enters 9th year

Join EUobserver

Support quality EU news

Join us