The eurozone will never reach its full potential and may face a new crisis in the future without a fiscal capacity, Portugal’s Prime Minister Antonio Costa told the European Parliament on Wednesday (14 March).
Europe’s priority must be to complete the Economic and Monetary Union, he added.
Costa’s unambiguous support for a broader euro area reform came after the Eurogroup President Mario Centeno, who is also Portugal’s finance minister, said a fiscal capacity for the eurozone was “not off the table” despite opposition from a group of countries.
Addressing the hemicycle in the third round of the ‘Future of Europe’ debates between EU leaders and legislators in Strasbourg, Costa said Europe was enjoying a moment of respite after the financial and migration crises of the past decade, but “there is no reason for complacency”.
The 2008 financial crisis had “lifted the lid on the weaknesses of the single currency”, he said, and the eurozone had “avoided a meltdown largely thanks to the ECB”, while the Juncker plan had created a tool to boost investments.
“But even with these steps, structural weaknesses have yet to be resolved. Asymmetries and imbalances between members limit the growth potential and endanger the stability of the single currency. As long as the Economic and Monetary Union is incomplete there will be a risk of a further crisis,” Costa said.
The missing fiscal component of the euro area has been debated for years, with no consensus yet reached on how deep and how fast to go. Emmanuel Macron’s ambitious EU reform agenda has breathed new life into the debate but a number of countries prefer a more cautious approach based around solidifying the bloc’s banking union first.
“Any monetary union has a fiscal capacity. I want to see eurozone establish its own fiscal capacity in conjunction with the European semester,” Costa told the Parliament.
“This fiscal capacity could help maintain stability when faced with external shocks, but its main aim must be investment; by providing financial tools to implement country-specific requirements set out in national reform programmes. This does not mean setting up a transfer union. I don’t want permanent transfers…”.
Arguing against possible cuts to the EU’s agricultural and regional funding after 2020, which Commission chief Jean-Claude Juncker has hinted at, Costa said securing a sufficient budget was of paramount importance and member states should be ready to boost their contributions and “tell their citizens the truth: We cannot have more Europe without giving more to Europe”.
“The long-term sustainable stabilisation of the eurozone is the first requirement if we are to build the future of Europe. The second is to give Europe a budget that matches its needs”.
“Our stance is we that we have to boost the Union’s own resources, increase the contributions of all member states. Portugal is ready to step up its contributions. This is the only way we can follow on our commitment to our citizens.”