José Manuel Barroso, European Commission president, has called on EU heads of state to "articulate the vision of where Europe must go" at a summit this week, saying this could lead to further treaty changes and, eventually, a two-speed Union. EURACTIV reveals details of proposals that will be circulated among EU leaders on 28-29 June.

"We are now, as I have been saying for some time, in a defining moment for European integration," Barroso told a public event on Tuesday (26 June) organised by the European Policy Centre (EPC), a Brussels think tank.

"We must articulate the vision of where Europe must go, and a concrete path for how to get there," the Commission president said, echoing Germany's calls for a "fiscal union" and a "political union" to draw a line under the sovereign debt crisis in the eurozone.

At the summit, EU leaders will examine a report prepared by Barroso in collaboration with Eurogroup President Jean-Claude Juncker and European Central Bank (ECB) President Mario Draghi.

The report, obtained by EURACTIV Germany, will start a process towards deeper EU integration and identifies the main building blocks – a banking union, a fiscal union and further steps towards a political union. 

"A big leap forward is now needed," Barroso stressed, admitting the task "may not be simple" as it will require countries to give up some of their national sovereignty in economic and fiscal matters – a federalist leap that France is hesitating to take.

Towards an EU treasury office?

Among the most far-reaching suggestions in the report are:

• Setting "upper limits" on member states' annual budgets;
• "Prior approval" for issuing government debt "beyond the level agreed in common";
•  Issuance of "common debt" as a medium term option;
• Setting up an EU "treasury office";
• Closer coordination on "labour mobility" and "tax coordination".

Two-speed Europe

Not all 27 EU member states will want to move forward on those policies, Barroso cautioned, saying that "some countries do have opt outs", without naming Britain or Denmark.

The integration process "should be progressive" and "focus on those member states which share the single currency," he said.

But eventually deeper economic and political integration will have to be backed by a new European treaty that goes beyond the German-inspired fiscal compact that was signed by 25 member states in March.

"We propose to look at further steps that may require changes to the Treaty," Barroso said, adding these would imply more coordination in taxation and labour policy.

Barroso also appeared to issue a warning to France whose President François Hollande has been pushing for joint debt issuance – or eurobonds – as a short-term solution to the crisis.

"Fiscal union is about much more than just eurobonds," Barroso said, backing German Chancellor Angela Merkel's argument that greater solidarity and greater responsibility "must go hand in hand" and could be envisaged only in the later stages of fiscal integration.

"Each step towards further solidarity would be accompanied by a corresponding step towards greater responsibility," Barroso said.

National referendums loom large

The report acknowledges that decisions on national budgets "are at the heart of Europe's parliamentary democracies" and that moves towards closer integration will require democratic safeguards involving national parliaments.

Barroso underlined this point, saying "greater democratic accountability and legitimacy are absolutely crucial" as such decisions "imply major changes to the way our citizens are governed and to the way their taxes are spent."

National democratic hurdles may indeed prove too high for far-reaching reforms to be approved across the entire 17 eurozone members, let alone the 27 European Union countries.

Irish voters rejected the Lisbon Treaty twice in referendums, most recently in 2008, before passing it once concessions were offered.

In France, voters rejected a proposed EU constitution in a 2005 referendum and may still be sceptical about delegating further power to Brussels, which is perceived as being too much inclined towards free-market policies.

In Germany, Finance Minister Wolfgang Schäuble recently told Der Spiegel that the country would probably have to hold a referendum on its constitution within a few years in order to clear the hurdles for further European integration.

“Nobody knows when this will happen. But I believe this will be the case more quickly than I thought only a few months ago,” Schäuble said, suggesting this could happen within less than five years.