Monday

18th Feb 2019

Opinion

Deepening Eurozone integration

  • "We need more time to prove that the existing rules perform sufficiently well. Let’s focus on stability first" (Photo: consilium.europa.eu)

The Treaties of the European Union set out a clear set of goals – inclusive and sustainable growth, price stability, sound fiscal positions and high level of employment.

And the framework of the Economic and Monetary Union (EMU) foresees a set of common rules to coordinate these policies closely.

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But the crisis has shown that when the weaknesses of the framework are exposed or when the rules are not sufficiently implemented, the integrity of the euro area is at stake and the objectives stipulated by the Treaties cannot be attained.

Our main challenge is therefore to ensure that the EMU framework is fully compatible with the requirements of sharing a common currency and increasing its resilience to future shocks.

The Four Presidents’ Report

The Euro Summit of 24 October 2014 invited the President of the European Commission, in close cooperation with the President of the Euro Summit, the President of the Eurogroup and the President of the European Central Bank "to prepare next steps on better economic governance in the euro area".

The Four Presidents’ Report is to be discussed at the European Council in June 2015.

Given the high political sensitivity, the main guidelines for the discussion are provided by the prime ministers’ sherpas who meet on regular basis.

All EU member states participate which provides for full transparency and the possibility for all parties to be involved. This is very important for my country which is not a member of the Eurozone but has a pro-euro government that has managed to change long-standing Czech euroscepticism.

The Czech contribution

The Czech Republic has a vital economic and political interest in the smooth functioning of the EMU not only due to our commitment to adopt the common currency but also given our close ties and significant trade relations with the euro area countries.

A healthy and stable EMU is also a precondition for our economic success. Therefore, it is in our strategic interest to participate in any discussion about further deepening of the EMU.

It is evident that high unemployment, lower growth prospects and different levels of competitiveness across the EMU are the most pressing problems we face today.

We all know that they have no quick solution.

Three pillar strategy

We fully support the Commission’s strategy based on three pillars to (i) continue with the implementation of structural reforms; (ii) intensify investment across the EU; (iii) not forget fiscal consolidation.

These simply-sounding priorities are however guided by a wide variety of rules.

Some are quite new, such as the Banking Union, monitoring of macroeconomic imbalances or the reformed Stability and Growth Pact.

Through these new rules, we have hopefully set up a robust system of rules which should turn the EMU into a well-functioning mechanism.

It is important to stick to these rules and ensure their proper enforcement instead of proposing further changes.

Stability first

In this context, the focus on prevention is extremely important. We need more time to prove that the existing rules perform sufficiently well. Let’s focus on stability first.

The Four Presidents' Report should deal primarily with short-term measures that could support the current system of economic governance and make it even more effective.

Our main focus should be the functioning of the European Semester which constitutes the basic platform to share our experience of structural reforms but also make commitments to push the reforms forward and effectively evaluate their impact.

Some new elements, such as the timing of Country Reports and more open discussion between the member states and the Commission, have already been introduced this year.

We welcome these changes as it provides the possibility to discuss the issues properly not only with the Commission but also with national parliaments and social partners.

More openness and intensive involvement of member states may help to better take into account national specificities and enforce the overall ownership of the framework.

Within the current framework

The Report should primarily elaborate on ways to make mutual coordination of policies more effective within the current framework.

The Commission should focus on policies with major economic effects and implications for growth and unemployment, especially across borders. This is where we can reach a real added value for the economic governance and in the end for the EU as a whole – and do it quickly, so that our citizens see the benefits of the EU.

Deeper institutional changes, including setting up a prospective fiscal capacity or new institutions, should be considered only after the current modified governance framework achieves a proper credibility or proves its inefficiency.

Any changes must take into account the potential social impact.

Work on the social dimension must remain an integral part of the process and we need to make sure we place social and economic issues on the same footing.

Given the current political unrest in many parts of the European Union, we must avoid divisive proposals and focus on issues where we can deliver quickly to show that the European Union remains the most effective arrangement Europe may have.

Tomáš Prouza is State Secretary for European Affairs of the Czech Republic

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