Friday

7th Aug 2020

Eurozone needs further reform, Juncker paper says

  • The paper speaks of a 'virtuous triangle' of structural reforms, investment, and fiscal responsibility (Photo: www.GlynLowe.com)

The eurozone requires further reform to ensure that it escapes a pattern of low growth and high unemployment, Jean-Claude Juncker has told EU leaders.

In an eight page analysis presented at the EU summit on Thursday (12 February), the European Commission president stated that there is “a need to move gradually towards "concrete mechanisms for stronger economic policy co-ordination, convergence and solidarity".

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

The strategy paper adds that governments must implement “a consistent strategy around the "virtuous triangle" of structural reforms, investment and fiscal responsibility”.

Failure to do so would consign the currency bloc to a prolonged period of economic stagnation since “the legacy of accumulated imbalances remains painfully visible".

The Juncker paper is the first step towards the preparation of a joint report by Juncker, together with European Council boss Donald Tusk, European Central Bank president Mario Draghi and Eurogroup chief Jeroen Dijsselbloem on the future of the Economic and Monetary Union expected for June.

It poses 12 questions for leaders, ranging from whether new policy instruments are needed for situations in which governments continue to “go harmfully astray” despite the new governance framework, to whether the eurozone should co-ordinate tax and spending powers through common finance ministry.

Since the eurozone debt crisis took hold in 2010, the EU has radically overhauled its economic governance framework, setting up a permanent bailout fund, enshrining the bloc’s limits on debt and deficits in national constitutions, giving the commission sweeping powers to intervene in national budgetary policy, and a banking union.

The paper also comments that leaders must find a way of “making decisions about support for struggling Euro area countries more democratically legitimate,” while adding, in a nod to the social costs of austerity programmes, that there should be a way of “evaluating support and reform programmes not only for financial sustainability but also for their impact on citizens of the country concerned”.

The eurozone “created a 'community of destiny' between the 19 member states that share the euro as their currency; this requires both solidarity in times of crisis and respect by all for commonly agreed rules.”

Under the new governance rules, budget deficit levels in the euro area fell to 2.6 percent in 2014, down from their peak of 6.2 percent of GDP in 2010, inside the 3 percent limit set out in the Stability and Growth Pact.

However, government debt has soared from an average of 66.2 percent of GDP on average in 2007, to 94.2 percent.

Meanwhile, the bloc has endured a painful double dip recession, while unemployment remains over 10 percent.

Juncker’s commission has prioritised plans for a Capital Markets Union to reduce the reliance of businesses on bank lending and for eurozone countries to become more attractive business destinations.

In the World Bank rankings on the ease of doing business, Finland is the only eurozone member in the top 10, while several countries are not even in the top 50.

Opinion

Worrying rows over future EU chemicals policy

It is of utmost concern to the environmental health community that forces within the EU Commission are actively trying to push back against a European Green Deal that is supposed to put people's health at its core.

Letter

An open letter to the EPP on end of Hungary's press freedom

I hate to break it to you, but excuses have run out. You have to look at the images of sobbing journalists in Index's newsroom, and shoulder part of the blame. Your silence, your continued procrastination led to this.

News in Brief

  1. Germany breached rights of Madeleine McCann suspect
  2. EU offers trade perks to Lebanon
  3. Germany charges four ex-Audi chiefs on emissions cheating
  4. UK quarantines Belgium, as European infections climb
  5. Bulgaria's Borissov mulls resignation
  6. EU prolongs anti-dumping duties on Chinese steel
  7. Swedish economy contracted less during April to June
  8. EU offers help to Lebanon after port explosion

Stakeholder

Renew Europe has a plan to combat gender-violence

This is not about supposedly traditional values – when was violence against women ever a value? – it is about living up to the European values we all signed up to. We have to put pressure on Poland.

Stakeholders' Highlights

  1. UNESDANext generation Europe should be green and circular
  2. Nordic Council of MinistersNEW REPORT: Eight in ten people are concerned about climate change
  3. UNESDAHow reducing sugar and calories in soft drinks makes the healthier choice the easy choice
  4. Nordic Council of MinistersGreen energy to power Nordic start after Covid-19
  5. European Sustainable Energy WeekThis year’s EU Sustainable Energy Week (EUSEW) will be held digitally!
  6. Nordic Council of MinistersNordic states are fighting to protect gender equality during corona crisis

Latest News

  1. Iraqis paid €2,000 each agree to leave Greece
  2. EU's most sustainable islands are Danish 'Sunshine Islands'
  3. Worrying rows over future EU chemicals policy
  4. Rainbow flag protesters charged by Polish police
  5. An open letter to the EPP on end of Hungary's press freedom
  6. Renew Europe has a plan to combat gender-violence
  7. Why EU beats US on green pandemic recovery
  8. Azerbaijan ambassador to EU shared anti-George Floyd post

Join EUobserver

Support quality EU news

Join us