As Greece threatens new shocks for the eurozone, Commission President Jean-Claude Juncker and top EU officials have laid out a vision for the currency involving tighter control from Brussels.
In a report published on Monday (22 June), in cooperation with the heads of other EU bodies, Juncker also proposed help for states in distress.
The report recommended governments back modifications in procedures over the next two years, and set out longer term ideas that could be adopted in new treaty obligations within the next decade.
Despite the crises of the past years, as governments unable to devalue national currencies have struggled to manage their finances amid global recession, the report began with the phrase: “The euro is a successful and stable currency.”
However, “quick fixes” to the problems now need overhaul, especially in view of high unemployment, to ensure the euro – more than a currency but a “political and economic project” – had a “lasting, fair and democratically legitimate basis”.
“The world is watching us and they want to know where we are going. Today we lay out monetary integration and bring it to its ultimate destination,” Juncker said in a statement. Valdis Dombrovskis, Vice-President for the Euro and Social Dialogue, described the plan as a “ambitious, yet pragmatic vision” for the future of the eurozone.
A need for economies and budgets to converge would “inevitably involve sharing more sovereignty over time”, the report added, saying such steps would only be envisaged after 2017, when French and German elections are being held.
“For the euro area to gradually evolve towards a genuine Economic and Monetary Union, it will need to shift from a system of rules and guidelines for national economic policy-making to a system of further sovereignty sharing within common institutions, most of which already exist and can progressively fulfil this task,” the report says.
In practice, this would require EU countries to “accept increasingly joint decision-making on elements of their respective national budgets and economic policies”, it adds, saying this would “pave the way for some degree of public risk sharing”, a reference to euro bonds.
One ultimate outcome could be a “euro area treasury”, although the report stressed it did not foresee “stabilising” cash transfers going permanently to certain states, nor seek to use them to equalise incomes among rich and poor countries.
The report foresees three stages in deepening integration:
- Stage 1 (1 July 2015 – 30 June 2017): A “deepening by doing” stage where small steps are taken towards fiscal convergence, using “existing instruments” and treaties.
- Stage 2 (30 June 2017 – 2025): A “more binding” completion stage, with “a set of commonly agreed benchmarks for convergence that could be given a legal nature, as well as a euro area treasury”.
- Stage 3 (By 2025 at the latest): A final stage, where the vision would be complete.
Earlier drafts of the report, seen by EURACTIV, were equally humble, remaining vague on social issues which are of crucial importance to France and southern EU member states struggling with high unemployment.
National leaders, who commissioned the report last year, will have a first chance to discuss it at a summit on Thursday and Friday that may be dominated by efforts to prevent Greece defaulting on its debts and losing access to the euro.
Differing views on the report are to be expected, though it contains elements likely to appeal to various parties.
It may please Germany by calling for tougher discipline on countries, like France and Italy at present, that fail to meet budget criteria.
But it also says that states running persistent trade surpluses, such as Germany, should adjust them. And it calls in vague terms for some shared fiscal resources to help countries in difficulty, an issue on which German Chancellor Angela Merkel has been wary.
In the short term, the report recommends quickly setting up national competitiveness authorities, possibly on existing Dutch and Belgian models, that would press governments to pursue policies that would help productivity. It calls for greater emphasis on promoting employment and sustainable pension systems as part of a more “forceful” use of annual EU reviews of national budgets.
The report also calls for measures to strengthen cooperation in avoiding the kind of banking crises that sucked in government cash in recent years. One measure it recommends taking within the next two years is to create a European Deposit Insurance Scheme, to share risks among EU states.
Dealing with Britain
One element of any tightening of eurozone coordination will be dealing with Britain, the main EU economy set on keeping its own currency. Prime Minister David Cameron has made guarantees of Britain’s access to the EU single market without euro membership a condition for the UK remaining in the bloc.
British officials have said they support tighter integration of the eurozone and would like new terms for London included in changes to treaties on the subject. But Juncker’s timeline makes clear that treaty change is not on his agenda until after 2017.
However, the preamble to the report emphasised that eurozone integration should not harm the single market in any way.
“Completing Europe’s Economic and Monetary Union” is known as the Five Presidents Report, drafted by Juncker with European Central Bank chief Mario Draghi, European Council President Donald Tusk, European Parliament speaker Martin Schulz and Jeroen Dijsselbloem, the chair of eurozone finance ministers.