Brussels, 26/06/2012 (Agence Europe) - The president of the European Council, Herman Van Rompuy, says that a three-pronged approach is needed to boost economic and monetary union (EMU), namely monetary union, budget union and economic union. This is urgently needed to solve the current eurozone sovereign debt crisis and will necessarily raise the question of the democratic legitimacy of greater European integration. On Tuesday 26 June, Van Rompuy published a position paper setting out his ideas on how to strengthen EMU, which will be discussed at the European summit on 28-29 June (see Documents section at the end of this newsletter). Depending on what happens at the summit, a detailed roadmap may be prepared for the December summit.
Van Rompuy said that any increase in the EU financial set-up must not endanger the integrity of the EU27 single market and must allow for the different characteristics of European nations, be they inside or outside the eurozone. He suggests a single supervision system, possibly covering all European banks, and active at both EU and national level, with ultimate responsibility resting with Brussels. The European treaty allows member states to transfer bank supervisory powers to the ECB, an option favoured by France and Germany.
Managed by a single authority, there would be European savings guarantee systems as well, financed initially by the financial industry, with the European Stability Mechanism (ESM) acting as lender of last resort.
Van Rompuy recommends a budget union extending further than the current economic governance moves (the revised stability pact and the fiscal compact). In order to ensure stronger budget controls at EU level, he suggests deciding together on national debt caps, any extension of which would require prior EU authorisation in the form of a special agreement. Countries breaking the European budget rules would be forced to amend their budget policies.
Once all this is in place, the issuing of common bonds by an EU treasury could be do-able in the medium-term (very short-term eurobills or a temporary redemption fund). Barroso says budget discipline and solidarity must go hand-in-hand. Speaking at the European Policy Centre on Tuesday, he said that each step forwards towards greater solidarity must be matched by a corresponding step towards greater responsibility. He said the EU treaties would need to be changed in order to achieve economic and monetary union, unlike banking union, which would be more straightforward.
Greater economic integration would chiefly be of concern to the eurozone nations. Van Rompuy wants the European semester and euro plus pact economic policy recommendations to be made binding, particularly the measures governing worker mobility and fiscal coordination. (MB/transl.fl)