Moscovici: Referendums not needed to deepen the eurozone

Economic Affairs Commissioner Pierre Moscovici and Vice-President for the euro Valdis Dombrovskis said that the Commission is not considering for the time being changing the benign interpretation of state aid rules to support European banks. [European Commission]

The European Commission backed alternative options to referendums in order to pass major changes needed to deepen the Economic and Monetary Union, amid “broader questioning” about the single currency.

“I have never been keen on referendums at all,” Economic Affairs Commissioner Pierre Moscovici said today (31 May).

He argued that they are expensive and there are other ways to ratify treaties, depending on the proposals put to a vote.

Moscovici and fellow Commissioner Valdis Dombrovskis  appeared before journalists to present the Commission’s reflection paper on the deepening of the Economic and Monetary Union.

Some of the ideas included in the paper “may require a treaty change”, Moscovici acknowledged but he added that would be addressed in a later phase.

Schäuble insists EU treaty change now is 'unrealistic'

Germany’s Finance Minister Wolfgang Schäuble said on Tuesday (23 May) that it is “unrealistic” to consider changing European treaties at this stage, calling instead for incremental steps by national governments to move EU integration forward in specific areas.

“This is not a legalistic paper, this will come after, it is a reflection paper,” he told reporters.

Moscovici recalled that some past treaties, like the European Stability Mechanism, were ratified by national parliaments without consulting citizens.

The action plan included in the document would substantially alter how national economies and social systems function.

But the Commission is wary of the perception about the euro among voters.

“While support for the single currency is strong – and even on the up – there is also a broader questioning about the value-added of the euro and the mechanisms of the EMU,” the reflection paper said.

Pro-EU stances have lost every single vote since French and Dutch citizens rejected the EU constitution in 2005. Irish voters rejected the Treaty of Lisbon in 2008, although they approved it in a second vote after concessions were made.

Greece voted against the bailout programme agreed with EU creditors in 2015. The Netherlands rejected the association agreement with Ukraine last year. Denmark rejected a partial opt-in for some EU competences. British citizens decided to end its relationship with the EU last June.

Macron, Merkel vow new momentum for Europe

France’s new President Emmanuel Macron and German Chancellor Angela Merkel yesterday (15 May) vowed to give a new impetus to Europe, even if it requires treaty change, after Macron appointed a prime minister from the conservative camp.

The paper described a roadmap to finalise the Economic and Monetary Union by completing the banking union, by adding a European Deposit Insurance Scheme and setting up the long-awaited fiscal union. The process would culminate with a truly political union.

In that final stage, Moscovici foresees a eurozone treasury that would be responsible for keeping in line member state accounts and would issue joint eurozone debt (eurobonds), led by a eurozone finance minister.

As a preliminary step, the executive foresees setting up by 2019 sovereign bond-backed securities for the eurozone, a light version of eurobonds without the mutualisation of debt.

Commission confirms work on securitisation of EU sovereign bonds

European Commission Vice-President Valdis Dombrovskis said today (27 January) that the goal of setting up European Safe Assets is to reduce banks’ exposure to sovereign debt.

The Commission pointed out that most of these ideas have been debated in the past. But it is urging action now because “the status quo is not an option”.

“The momentum for further reform of the EMU has been partly lost,” the reflection paper said. “But we simply cannot afford to wait for another crisis before finding the collective will to act,” the reflection paper added.

Fiscal capacity

Compared to previous roadmaps and blueprints, such as the Five Presidents’ Report, the Commission outlined in greater detail the options to set up a “macroeconomic stabilisation function” to shield countries against sudden shocks.

The executive also proposed three possible options for this common fiscal capacity. The first possibility is a European Investment Protection Scheme to support planned investment projects or activities in times of economic downturn.

Slovak minister: 'A European unemployment scheme is important'

State Secretary of Finance Ivan Lesay does not include Slovakia among the “hawkish” member states opposed to a fiscal stimulus for the eurozone. In an interview with EURACTIV, he also backed calls for a European unemployment insurance scheme.

The second option is a European Unemployment Reinsurance Scheme, that would support national schemes, although it would require prior convergence of labour market policies, the Commission warned.

The final option is a rainy day fund that would be financed on a regular basis, and would be triggered in case of economic shocks. Given that payments would be limited to the contributions, the Commission admitted that its capacity could be “too small” in case of a large shock.

The paper said that the design of this fiscal capacity may have to be reflected in the next multiannual financial framework, the EU’s long-term budget.

Officials expect further details to emerge after Germany’s September elections but before the MFF draft proposal, due next year.

A stricter definition of convergence?

The Commission warned that one of the fundamental flaws of the EMU is the divergence of its economies.

In order to progress on the re-convergence of the member states, the institution insisted on the importance of structural reforms and improving the EMU governance.

But the executive left the door open to redefining convergence in a more ambitious manner, an extreme that could complicate the adoption of the euro by candidate countries.

The Commission said that eurozone and candidate members need to agree on a common approach that could go beyond the nominal convergence used since the Treaty of Maastricht, based on deficit and debt indicators.

Instead, countries could aspire for real convergence in order to meet the Union’s objective of balanced growth, social cohesion and full employment. But achieving high living standards and similar income levels would require more efforts by Romania and Bulgaria, the poorest countries in the bloc and both on the eurozone’s waiting list.

Anniversary highlights non-eurozone aversion to EU currency

The euro, used by nearly 340 million people each day in 19 countries, marked its 15th birthday on 1 January without celebration. A Eurobarometer report published in December shows little enthusiasm for the currency in non-eurozone countries.

The Commission nevertheless expects all countries except Denmark to join the eurozone, although no deadline is fixed in the treaties.

Moscovici explained his past comments when he paraphrased ‘The Godfather’ to say that non-euro area members would get an offer that they could not refuse to join the common currency in today’s blueprint.

“In the Commission, we are not in a mafia model,” he insisted, adding that the reflection paper just summarised ideas to complete the EMU.

Further Reading

  • European Commission: reflection paper on the deepening of the economic and monetary union.

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