Thursday

19th Oct 2017

EU hopes for 'big leap' with fiscal, political union plan

  • EU council President Van Rompuy (r) wants to reach a "common understanding" on how to further integrate the eurozone at this week's summit (Photo: consilium.europa.eu)

EU officials have drawn up a far-reaching plan that would eventually turn the eurozone into an outright fiscal union, but acceptance by EU leaders - whose powers it reduces - will require a major leap of political faith.

The seven-page document suggest that ultimately the 17-nation single currency area will need a treasury office and a central budget.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

Among the short-term changes required is the de facto handing over of budget power and economic policies to the EU level.

"Upper limits on the annual budget and on government debt levels ... could be agreed in common," says the paper. Budgets that breach fiscal rules would have to be altered.

A banking union "should evolve as soon as possible." Currently it is difficult to get a picture of the financial health of national banks, while taxpayers foot the bill when things go wrong.

Supervision of all banks would be at the European level and the EU authority would have "pre-emptive intervention powers." The paper - drawn up by the presidents of the European Commission, European Council, Eurozone and European Central Bank - moots giving the European Central Bank the ultimate authority.

In the medium term, so long as a "robust framework for budgetary discipline and competitiveness is in place, some form of debt mutualisation "could be explored."

Meanwhile, labour policies and tax polices - until now a no-go area for the European Commission - will no longer be exempt. An integrated economic eurozone will need "co-ordination and convergence in different domains of policy" says the paper explicitly mentioning "labour mobility" and "tax coordination."

"Let me tell you here that fiscal union is about much more than just euro bonds. It also means more co-ordination in taxation policy and a much stronger European approach to budgetary matters," said commission President Jose Manuel Barroso at the European Policy Centre in Brussels on Tuesday (26 June).

"Faced with this stark reality, standing still is not an option. A big leap forward is now needed."

The paper will form the basis of what are likely to be heated discussions at the EU summit at the end of the week. It is also due to be discussed by the finance ministers of France, Germany, Spain and Italy, meeting in Paris on Tuesday evening.

The ideas in it are supposed to reassure markets that eurozone leaders are politically and financially committed to the single currency. If the paper gets the go ahead, the group of four presidents will will draw up a detailed plan with a timetable for putting measures in to place by the end of the year.

The blueprint is likely to aggravate a key faultline between France and Germany, exposed once again last week. Berlin wants more powers transferred to Brussels if it is to agree to underwriting the debt of other countries. Paris - traditionally reluctant to hand powers to the European Commission - says solidarity must come first.

More broadly, it will test EU leaders commitment to the eurozone - budgetary matters and the right to decide how and on what to spend money go to the core of what it means to be a state.

Van Rompuy to draft plan for deeper economic union

EU leaders have tasked council chief Van Rompuy with drafting a plan on deepening the eurozone's economic union. A similar report was issued in 2010, leading to tougher sanctions for deficit sinners.

News in Brief

  1. EU summit moved to previous building after fumes scare
  2. Catalonia will 'not back down'
  3. New toxic incident in EU building ahead of summit
  4. Murdered Malta journalist's family invited to Parliament
  5. EU food safety chief denies keeping studies 'secret'
  6. EU states pledge 24,000 resettlement places so far
  7. US ready for arms sale to update Greece's F-16 fleet
  8. Austria's Green leaders step down following election failure

Stakeholders' Highlights

  1. EU2017EENorth Korea Leaves Europe No Choice, Says Estonian Foreign Minister Sven Mikser
  2. Mission of China to the EUZhang Ming Appointed New Ambassador of the Mission of China to the EU
  3. International Partnership for Human RightsEU Should Seek Concrete Commitments From Azerbaijan at Human Rights Dialogue
  4. European Jewish CongressEJC Calls for New Austrian Government to Exclude Extremist Freedom Party
  5. CES - Silicones EuropeIn Healthcare, Silicones Are the Frontrunner. And That's a Good Thing!
  6. EU2017EEEuropean Space Week 2017 in Tallinn from November 3-9. Register Now!
  7. European Entrepreneurs CEA-PMEMobiliseSME Exchange Programme Open Doors for 400 Companies Across Europe
  8. CECEE-Privacy Regulation – Hands off M2M Communication!
  9. ILGA-EuropeHealth4LGBTI: Reducing Health Inequalities Experienced by LGBTI People
  10. EU2017EEEHealth: A Tool for More Equal Health
  11. Mission of China to the EUChina-EU Tourism a Key Driver for Job Creation and Enhanced Competitiveness
  12. CECENon-Harmonised Homologation of Mobile Machinery Costs € 90 Million per Year

Latest News

  1. EU okays Privacy Shield's first year
  2. EU seeks to decrypt messages in new anti-terror plan
  3. EU agencies defend research ahead of glyphosate vote
  4. Spain points at elections as exit to Catalan crisis
  5. How EU can ensure Daphne Caruana Galizia's legacy survives
  6. Juncker dinner to warm up relations with eastern EU
  7. Court hearing in MEPs 'private' expenses battle
  8. The unbearable lightness of leadership