Fully-fledged Economic and Monetary Union: a common European destiny

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The European Central Bank headquarters in Frankfurt, Germany. [Jim Woodward/Flickr]

If the common currency and the European Union itself are to survive, radical changes and bold decision making are needed, writes Petros Fassoulas.

Petros Fassoulas is Secretary General of European Movement International.

Few things can focus the mind as much as the events that unfolded last July. While Greece was facing down the abyss, the EU had to take a good, long, hard look at itself.

In fact, ever since the banking and sovereign debt crisis unfolded, the EU has been in a constant state of soul-searching. The structural shortcomings in the setup of the current Economic and Monetary Union (EMU) have been violently exposed, forcing the EU to reconsider the whole architecture of the Eurozone’s governance structure.

A lot has happened in the past few years and the Eurozone has come a long way, feeling its way through a plethora of challenges. Banks at the brink of collapse, nations staring into the jaws of bankruptcy and a common currency facing a break up which was not meant to happen.

A long way but not far enough. This is not just about the euro. This is about the EU itself, the survival of one is inseparably linked to the existence of the other. If we are to avert the unthinkable, if we are to build a strong common currency which will guarantee the success of the EU itself, change is very much needed.

In our most recent policy paper the European Movement concluded that a fully-fledged Economic and Monetary Union is the only way forward. A Political Union is needed for genuine European Economic Governance and an effective common European economic policy. Nothing short of joint budgetary and fiscal coordination, convergence in economic policies, a fiscal capacity for counter-cyclical policies, and a social dimension will do.

To achieve that we need to increase the executive powers of the European Commission, coupled with the establishment of a High Representative for the Eurozone. Enhancing the role of the European Parliament is also crucial. The co-decision procedure must be extended to cover EMU issues, not least by strengthening the European Parliament’s Committee on Economic and Monetary Affairs, with special information rights and scrutiny responsibilities. National parliaments should also have a greater involvement on EMU-issues, allowing them to scrutinise the decisions of their national governments.

We also need an additional fiscal capacity for the EMU, drawn from new forms of own resources. This ‘Eurozone budget’ could be used to promote structural reforms, increase economic convergence, and mitigate asymmetric macro-economic shocks, helping member states when they lose competitiveness or fall into dire straits.

Furthermore, strengthening the ECB’s role as lender of last resort will instil confidence in the markets when certain parts of the Eurozone lose competitiveness or certain sectors are hit by external asymmetric shocks. In addition, common issuance of debt in the form of Eurobonds could increase financial and monetary stability by reducing contagion between sovereign states and the banking system.

Additionally, we propose the establishment of a European Unemployment Insurance Scheme, which would function as a stabilisation and solidarity mechanism. Such a scheme will mitigate the effect of asymmetric shocks, support national efforts to deal with cyclical and structural unemployment, and could be financed by the Eurozone fiscal capacity. If nothing else, it will strengthen the link between the EU and its citizens, as those most in need of assistance will be able to benefit directly from the EU budget.

Last but certainly not least, we believe that mainstreaming the social dimension into the overall EMU governance structure will increase convergence, mitigate negative impacts of social divergence, and increase the connection with citizens.

We envision a Social Union, which should include binding common social convergence criteria, an obligatory minimum support scheme, parameters for minimum wages and minimum income, and the integration of social policy objectives in macroeconomic and budgetary surveillance.

The EU is at a crossroads. With internal and external challenges calling into question its founding principles, we need to put aside hesitation, ignore national calculations and boldly go down the path of our common European destiny. Because unless we stand together we run the risk of wasting 60 years of European integration.