With an eye on Italy and Spain and the possible political and financial turmoil there, the European Commission chief Jean-Claude Juncker called once again on Tuesday (5 June) for a fast and deep reform of the Economic and Monetary Union.
The fall of the Spanish government over a corruption scandal last week put the opposition Socialists in charge, with a minority government. Even more worrying for Brussels is the formation of a populist administration in Italy, its possible impact on financial markets and the contagion effect on other member states.
“Completing the Economic and Monetary Union is more important than ever. Recent developments are a reminder of the need to make progress now,” Juncker said in a speech at the Brussels Economic Forum, in a clear reference to the political situation in southern Europe.
But Juncker also made an effort to soften a recent controversy created by Commissioner Günther Oettinger comments on Italy. “Italy’s place is at the heart of Europe and of the euro,” president Juncker said and underlined “how much this country has done to build a united Europe.”
Italy, he stressed, “deserves respect and trust”.
A new start for Europe
Ahead of a European Council at the end of June, Juncker insisted again on the need to complete the reform of the EMU to protect the common currency and strengthen the European economy.
“We should never underestimate how far the euro has come. But neither should we underestimate the existential crisis that we have been through,” he underlined. The 2008 financial crisis, Juncker said, “has left deep scars on our political, economic and social fabric, which we are still struggling to address.”
Juncker called once again for a completion of the Banking Union and welcomed the progress on risk reduction reached at the Ecofin two weeks ago, where EU finance ministers agreed that the European Stability Mechanism will play the role of a common backstop, with a strong budget line in the future European budget to support reforms and strengthen European solidarity.
And he stressed the need for every decision to be taken “collectively, in an inclusive and transparent manner, with strong parliamentary scrutiny at all levels.”
However, given the discrepancies between the proposals coming from Paris and Berlin, agreeing on a reform of the EMU by June might be a tall order.
Banco Santander chief backs the need to reform the EMU
Ana Botín, chief executive of Banco Santander, Spain’s biggest lender, backed the need to reform the EMU in her own speech at the Forum. Botín also highlighted the current political instability in the south of Europe but rushed to underline that Spain was not the same as Italy.
Eurozone countries are linked to each other, hence the fears of a fallout from the possible turmoil in Italian or Spanish financial markets in the rest of Europe. And this, Botín said, “should remind us why the eurozone’s capacity to face shocks and periods of uncertainty is so important”.
“It is not only important but urgent that we make the eurozone more resilient to such uncertainty and volatility,” the Santander CEO pointed out. “And we saw in 2012 that some measures of collective viability are the best buffer against markets nerves and contagion,” Botín stressed.
She called for a balance between discipline and incentives and an increased risk sharing. “We have the basics of a roadmap in CMU in Europe, of a single deposit insurance system… but we must innovate this into a clearer plan of action,” she said.
The banker argued that if this cannot be done at once, “we might need to look at pragmatic options for a multi-speed eurozone”. But it is key to define the structural reforms member states are expected to pursue, she insisted.
“It seems to me that we can negotiate the pace but we can no longer be ambiguous about the destination,” Botín said.