Monday

28th May 2018

Commission lays out vision to complete euro

  • The EU executive is proposing a two-phase calendar to complete the architecture of the economic and monetary union. (Photo: Hannelore Foerster)

The European Commission presented on Wednesday (31 May) its proposal to "move forward" on eurozone integration with a treasury, a finance minister and several instruments to make the financial sector less vulnerable to crises.

The document, which is part of an ongoing reflection about the future of the EU, aims to "fill the gaps" in the single currency and to help the eurozone economies to converge.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

  • "Status quo is not an option," said finance commissioner Pierre Moscivici (r) (Photo: European Commission)

"We cannot and should not wait for another crisis," said commission vice president Valdis Dombrovskis, who admitted that "doubts remain about the full stability and safety of the system".

He said that the Commission was putting forward a "balanced approach", where "solidarity and responsibility, risk-reduction and risk-sharing go hand in hand".

The EU executive is proposing a two-phase calendar.

First, it calls on member states to complete the banking union and the market capital union before the end of 2019. Then, until 2025, the "architecture" of the economic and monetary union should be completed with a series of "more far-reaching measures".

In the first phase, the Commissions says that the measures already agreed or implemented should be topped up with a financial backstop: the Single Resolution Fund and a European deposit insurance scheme.

The fund would be able to rescue a failing bank, while the scheme would protect people’s savings.

'Historical opportunity'

At the same time the "democratic accountability and effectiveness" of the eurozone governance should be improved, with an increased role for the European Parliament, but no specific eurozone parliament.

After anti-EU forces were kept from power in the Dutch and French elections, just months after Brexit shook the foundations of the bloc, the EU has an "historical opportunity" to "move forward", said finance commissioner Pierre Moscovici.

"Status quo is not an option," he said, while putting on the table propositions to increase EU oversight on economic policies.

The EU executive says that integrating parts of the EU treaty on stability, coordination, and governance in the economic and monetary union, the so-called fiscal compact, in EU law "could be a necessary step" as soon as next year.

The fiscal compact was agreed in 2012, at the height of the financial crisis, in order to "foster budgetary discipline" through more coordination and supervision of national policies.

In the second phase, before 2025, the Commission proposes to create an "EU finance minister" in charge of a eurozone treasury.

The "minister" would combine the functions of euro commissioner and permanent president of the Eurogroup. The treasury would carry out the "economic and fiscal surveillance" of member states.

The Eurogroup itself, which is currently an informal gathering of the eurozone finance ministers, would become an official ministerial council and would be granted "decision-making competences".

Debt mutualisation

At the same time, the Commission lays out a series of measures to reduce risks in the financial sectors, in particular the link between the banking sector and national sovereign debts.

The most controversial ones could be the propositions to create a so-called "safe asset" to issue bonds in common and to change regulation for sovereign bonds so that banks are encouraged to diversify their holdings.

Although the proposal does not amount to creating eurobonds, a system that would put EU countries' debt in common, it could raise eyebrows in countries like Germany, which categorically rejects eurobonds.

The Commission admits that "the question of debt mutualisation is heavily debated" and that the idea "raises a number of complex legal, political and institutional questions".

It also said that member states would need to discuss the idea of a European monetary fund or of a “rainy day fund" to help absorb economic shocks.

"There is almost everything, but in vague terms, for an indefinite future, and subject to conditions," Daniel Gros, from the Centre for European Policies Studies, a think tank in Brussels, told EUobserver.

He pointed out that the Commission makes "no clear choice" on how to reduce risks for the financial sector when it comes to sovereign debts, or to let the public sector issue securitised bonds.

"It is so vague that it is difficult to say whether it is big or not," he said, adding that "the timeline is not important" since the proposals would have to be detailed before being discussed, not to mention adopted.

Gros said one likely reason why the proposals were so vague was that there were disagreements inside the Commission.

"We are making propositions for the future," Moscovici said, as a way to admit that member states will likely be reluctant to endorse all the Commissions's ideas.

But he warned that "we can't have a two-speed Europe, nor a two-speed euro".

"A two-speed euro has serious consequences," he said: “the increase of political differences and the rise of extremism."

Macron and Merkel to 'reconstruct' the EU

The French and German leaders will present a common proposal to deepen and strengthen the EU and the eurozone. They say they are ready to change the EU treaties.

Eurozone bank needs more scrutiny, says NGO

Transparency International says eurozone's central bank is not subject to "appropriate democratic scrutiny" and should have no say on EU bailout projects.

Analysis

Juncker rules out exclusive eurozone

The EU Commission president said that he wants "a stronger Economic and Monetary Union" but ruled out any ideas that could create a separate group within the EU.

Debt relief talks mar Greek bailout exit

While the Greek government has committed to fulfill the last creditors' requirements in the coming month, Europeans and the International Monetary Fund are still far from an agreement on measures to reduce the country's debt in the future.

Analysis

EU has no 'magic bullet' against US Iran sanctions

EU leaders in Sofia will discuss how they can protect the bloc's economic interests against US threats to sanction companies doing business in Iran. But their options are limited.

Opinion

EU budget must not fortify Europe at expense of peace

Given the European Commission new budget's heavy focus on migration, border management and security, many are asking whether the proposal will fortify Europe at the expense of its peace commitments.

Stakeholders' Highlights

  1. Counter BalanceEuropean Ombudsman requests more lending transparency from European Investment Bank
  2. Nordic Council of MinistersOECD Report: Gender Equality Boosts GDP Growth in Nordic Region
  3. Centre Maurits Coppieters“Peace and reconciliation is a process that takes decades” Dr. Anthony Soares on #Brexit and Northern Ireland
  4. Mission of China to the EUMEPs Positive on China’s New Measures of Opening Up
  5. Macedonian Human Rights MovementOld White Men are Destroying Macedonia by Romanticizing Greece
  6. Counter BalanceControversial EIB-Backed Project Under Fire at European Parliament
  7. Nordic Council of MinistersIncome Inequality Increasing in Nordic Countries
  8. European Jewish CongressEU Leaders to Cease Contact with Mahmoud Abbas Until He Apologizes for Antisemitic Comments
  9. International Partnership for Human RightsAnnual Report celebrates organization’s tenth anniversary
  10. Nordic Council of MinistersNordic Cooperation Needed on Green Exports and Funding
  11. Mission of China to the EUPremier Li Confirms China Will Continue to Open Up
  12. European Jewish CongressCalls on Brussels University to Revoke Decision to Honour Ken Loach

Stakeholders' Highlights

  1. Sustainable Energy Week 2018"Lead the Clean Energy Transition"- Register and Join Us in Brussels from 5 to 7 May
  2. EU Green Week 2018Green Cities for a Greener Future. Join the Debate in Brussels from 22 to 24 May
  3. Nordic Council of Ministers12 Recommendations for Nordic Leadership on Climate and Environment
  4. Macedonian Human Rights MovementOxford Professor Calls for an End to the Anti-Macedonian Name Negotiations
  5. ACCAPeople Who Speak-Up Should Feel Safe to Do So
  6. Mission of China to the EUProgress on China-EU Cooperation
  7. Nordic Council of MinistersWorld's Energy Ministers to Meet in Oresund in May to Discuss Green Energy
  8. ILGA EuropeParabéns! Portugal Votes to Respect the Rights of Trans and Intersex People
  9. Mission of China to the EUJobs, Energy, Steel: Government Work Report Sets China's Targets
  10. European Jewish CongressKantor Center Annual Report on Antisemitism Worldwide - The Year the Mask Came Off
  11. UNICEFCalls for the Protection of Children in the Gaza Strip
  12. Mission of China to the EUForeign Minister Wang Yi Highlights Importance of China-EU Relations