Brussels, 13/09/2012 (Agence Europe) - The president of the European Council, Herman Van Rompuy, announced on Thursday 13 September, that he would attempt to begin his consultations next week on strengthening Economic and Monetary Union. In this connection, he will be proposing a “central budget” with a limited issue of common debt, to reduce the risk of contagion.
This kind of union is expected to have a budgetary dimension to it and will include, “tools to deal with asymmetric shocks and to help prevent contagion possibly through a central budget for the euro area”, explained Van Rompuy in a document summarising the main challenges facing them in these consultations. This could include a limited issue of common debt so that risk sharing is accompanied by measures that go in the direction of common governance on budgets.
The document explains that budgetary union could also include “a stronger capacity at a European level (for example, by creating a Treasury) and a central budget, whose role and functions would need to be defined”. The document raises a number of questions for the debate but does not provide any answers. Consultations with EU member states and the European Parliament are expected to go the heart of the matter next week. At the end of June, Van Rompuy obtained a mandate from European governments to propose a roadmap by October for enhancing economic and monetary union around four pillars: financial, budgetary and economic policy frameworks, as well as greater democratic accountability.
With regard to the financial sphere, the document mentions many points that require clarification, particularly the conditions in which permanent Eurozone rescue funds should be allowed to directly recapitalise banks, the way in which the eurozone financial supervision mechanism should work and its relations with the European Banking Authority, which regulates the entire EU banking system.
On the question of economic coordination, Van Rompuy considers that it will be necessary to define what additional measures can be taken to encourage states to re-establish and maintain a high level of competitiveness in a monetary union. Should the tax coordination and financial stability principles be made more binding or should “more common standards” be put in place in certain areas of economic policy, the document asks. On the question of democratic accountability, the document highlights the need to closely involve the European Parliament and national parliaments and asks whether an economic policy framework that is more integrated would require democratic control bodies that are, “specific to the euro zone”. (LC/trans/fl)