Sunday

17th Feb 2019

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.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

  • "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.

Feature

Romania enlists priests to promote euro switchover plan

Romania is due to join the single currency in 2024 - despite currently only meeting one of the four criteria. Now the government in Bucharest is enlisting an unlikely ally to promote the euro to the public: the clergy.

News in Brief

  1. Spain's Sanchez calls snap election on 28 April
  2. 15,000 Belgian school kids march against climate change
  3. May suffers fresh Brexit defeat in parliament
  4. Warning for British banks over Brexit staff relocation
  5. Former Italian PM wants Merkel for top EU post
  6. Antisemitic incidents up 10% in Germany
  7. Italy's asylum rejection rate at record high
  8. Hungary will not claim EU funds for fraudulent project

Opinion

Eastern Europe Matters

The foreign ministers of Sweden, Poland and the Czech Republic reflect on 10 years of the Eastern Partnership with Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine.

Stakeholders' Highlights

  1. Counter BalanceEU bank urged to free itself from fossil fuels and take climate leadership
  2. Intercultural Dialogue PlatformRoundtable: Muslim Heresy and the Politics of Human Rights, Dr. Matthew J. Nelson
  3. Platform for Peace and JusticeTurkey suffering from the lack of the rule of law
  4. UNESDASoft Drinks Europe welcomes Tim Brett as its new president
  5. Nordic Council of MinistersNordic ministers take the lead in combatting climate change
  6. Counter BalanceEuropean Parliament takes incoherent steps on climate in future EU investments
  7. International Partnership For Human RightsKyrgyz authorities have to immediately release human rights defender Azimjon Askarov
  8. Nordic Council of MinistersSeminar on disability and user involvement
  9. Nordic Council of MinistersInternational appetite for Nordic food policies
  10. Nordic Council of MinistersNew Nordic Innovation House in Hong Kong
  11. Nordic Council of MinistersNordic Region has chance to become world leader when it comes to start-ups
  12. Nordic Council of MinistersTheresa May: “We will not be turning our backs on the Nordic region”

Latest News

  1. Sluggish procedure against Hungary back on table
  2. Could Finnish presidency fix labour-chain abuse?
  3. Brexit and trip to Egypt for Arab League This WEEK
  4. Belgian spy scandal puts EU and Nato at risk
  5. EU Parliament demands Saudi lobby transparency
  6. Saudi Arabia, but not Russia, on EU 'dirty money' list
  7. EU agrees draft copyright reform, riling tech giants
  8. Rutte warns EU to embrace 'Realpolitik' foreign policy

Stakeholders' Highlights

  1. International Partnership for Human RightsOpen letter to Emmanuel Macron ahead of Uzbek president's visit
  2. International Partnership for Human RightsRaising key human rights concerns during visit of Turkmenistan's foreign minister
  3. Nordic Council of MinistersState of the Nordic Region presented in Brussels
  4. Nordic Council of MinistersThe vital bioeconomy. New issue of “Sustainable Growth the Nordic Way” out now
  5. Nordic Council of MinistersThe Nordic gender effect goes international
  6. Nordic Council of MinistersPaula Lehtomaki from Finland elected as the Council's first female Secretary General
  7. Nordic Council of MinistersNordic design sets the stage at COP24, running a competition for sustainable chairs
  8. Counter BalanceIn Kenya, a motorway funded by the European Investment Bank runs over roadside dwellers
  9. ACCACompany Law Package: Making the Best of Digital and Cross Border Mobility,
  10. International Partnership for Human RightsCivil Society Worried About Shortcomings in EU-Kyrgyzstan Human Rights Dialogue
  11. UNESDAThe European Soft Drinks Industry Supports over 1.7 Million Jobs
  12. Mission of China to the EUJointly Building Belt and Road Initiative Leads to a Better Future for All

Join EUobserver

Support quality EU news

Join us