Barroso attacks member states, US, banks

“We must be absolutely honest and clear in the analysis of the state of the Union,” he said. “We are now facing the greatest challenge our Union has ever seen, I believe in its history.”

He said that in the face of “earthquakes that shake the international order,” Europe is threatened by a crisis of confidence in “our leaders in general, of Europe itself, our ability to find solutions,” and warned of the danger of countries leaving the EU and the return of nationalism.

Referencing the approaching centenary of the start of the First World War and the “dark period” that followed, Barroso lambasted what in EU and academic circles is known as “intergovernentalism”, or a form of European lawmaking that takes place essentially between government leaders and diplomats.

The term may appear obscure to ordinary citizens, but since the earliest days of European integration more than five decades ago, the battle between intergovernmentalism and the so-called “community method”, which would rather privilege the powers of the European institutions and in particular the European Commission over those of national governments

The European Council and the Council of Minsters, which represent the member states is the home of this approach, a way of doing business that Barroso said “could be the death of a united Europe”.

“The reality today is that intergovernmental co-operation is not sufficient to get Europe out of this crisis, to give Europe a future. On the contrary, a intergovernmentalism may lead to the re-nationalization and fragmentation,” he said.

He argued that it is no longer just the dream of supporters of a European federation - a much deeper level of integration than currently exists - but the markets that are demanding a unification of Europe.

“We must go further. We need to complete our monetary union with an economic union,” he said.

“It was an illusion to think that we could have a common currency and a single market with national approaches to economic and budgetary policy. Let's avoid another illusion that we can have a common currency and a single market with an intergovernmental approach.”

The parliament on Wednesday voted in favour of a far-reaching package of six pieces of legislation that the president last year called a “silent revolution” in European integration. But even as this legislation is set to be enacted, Barroso said Europe needs to go further, and that the commission will be unveiling proposals on deeper economic centralisation in the coming weeks.

He championed the commission as the hero of the piece, “the economic government of the Union.”

“We need more than ever the independent authority of the commission, which proposes and assesses actions that the member states should take,” he continued. “Governments, let's be frank, cannot do this by themselves. Nor can this be done by negotiations between governments.”

“The commission is the guarantor of fairness.”

The president said that it may be necessary to change the EU treaties and abolish unanimous decision-making in the bloc entirely.

“It may be necessary to consider further changes to the treaty,” he said. “I am also thinking particularly of the constraint of unanimity. The pace of our joint endeavour cannot be dictated by the slowest.”

“Today we have a Union where it is the slowest member that dictates the speed of all the other member states ... A member state does not have the right to block the moves of others, the others also have their national sovereignty and if they want to go further, they should go further.”

He also announced a series of specific measures that the bloc needed to take to solve the ongoing sovereign debt crisis, including the need for a strengthening of “mechanisms for crisis resolution” with “credible firepower and effective firewalls for the euro” - hinting at the massive expansion of the bloc’s rescue resources into the trillions of euros, a plan understood to be currently in the works.

Barroso called for an acceleration into force of the European Stability Mechanism, the replacement for the current rescue fund scheduled to go online in 2013.

As already trailed, he also said that Brussels will present options in the next few weeks for “stability bonds”, a twist on the calls for from many quarters for “eurobonds”, or the issuance of debt at the European level. The move is steadfastly opposed by Germany, which fears a rise in its borrowing costs were such a mechanism to materialise.

The commission will as well unveil proposals before the end of the year on new rules for credit rating agencies, bank resolution and “personal responsibility of financial operatives”.

He moved on from his skewering of European capitals to censure foreign governments for their criticisms in recent weeks of Europe’s ability to manage its crisis. US President Barack Obama and US treasury secretary Timothy Geithner have repeatedly pummeled the EU for its dithering.

“I feel hurt when I see some in other parts of the world, the patronising way they say to us Europeans, what we need to do. I think frankly that we have problems, very serious problems, but I think we do not have to apologise for our democracies. We need not apologise for our social market economy,” he said, in a veiled reference to the American criticisms.

He called on national EU governments to find in themselves “a burst of pride to be European, a burst of dignity and to say our partners ‘Thanks for your advice, but we can all overcome this crisis.’ I have this pride in being European.”

The conservative politician renowned for his youth in revolutionary Portugal as a far-left firebrand, rounded out his barbs by laying into the banking sector, using the occasion to announce that the commission had on Wednesday adopted a proposal for a tax on financial transactions, a plan bitterly opposed by the UK.

“In the last three years, member states - I should say taxpayers - have granted aid and provided guarantees of €4.6 trillion to the financial sector. It is time for the financial sector to make a contribution back to society,” adding that in some member states they do pay their fair share.

“It is a question of fairness. If our farmers, if our workers, if all the sectors of the economy from industry to agriculture to services, if they all pay a contribution to the society also the banking sector should make a contribution to the society.”

Calling the current crisis “a trial by fire for our entire generation,” he said that Europe nevertheless does have a future.

“Some say it is very difficult, it is not possible. Here I recall the words of a great man, a great African, Nelson Mandela: "It always seems impossible, until it is done. Let's do it.". We can do it with confidence, we can do - the renewal of our Europe.”