Brussels, 31/05/2013 (Agence Europe) - In Paris on Thursday 20 May 2013, the French president, François Hollande, and the German chancellor, Angela Merkel, published proposals on boosting economic and monetary union (EMU) over the next two years, proposals for the attention of the European Summit next month (June). The top priority is using EU resources to tackle youth unemployment in the immediate term.
France and Germany say that, in full respect of the stability and growth pact, they will move towards balanced structural budgets, noting that the speed of adjustment needs to be defined for each member state individually. This process, they say, should go hand-in-hand with targeted short-term measures to stimulate growth and support job creation. They say their contribution takes account of the situation in Europe of low growth for some, zero growth or even recession for others and unemployment at record levels, said Hollande. The day after the European Commission published its economic forecasts for France (see EUROPE 10855), Hollande said that it was the Commission's job to issue recommendations on reforms, but for the French state to decide on the exact content and how the reforms would be implemented.
France and Germany, the two biggest economies in the eurozone, say that greater coordination of economic policy will enable the eurozone to improve its competitiveness and affirm its economic and social model in an ever more competitive world. Firstly, an assessment of the components of competiveness should be carried out, based on common indicators, to identify strengths and vulnerabilities in each economy. This should be followed by defining areas where action is to be taken, such as the labour market, unemployment, social inclusion, pensions, product market, public sector efficiency, innovation, education and the vocational training system. Within EMU, convergence of tax systems is described as “crucial” by the two countries. They note the social dimension of EMU and suggest considering the introduction of minimum wages, set at national level, to ensure a high level of employment and fair pay. This approach is currently under discussion in Germany.
Hollande said that he and Merkel agreed on contractual arrangements for competitiveness, in other words that countries that introduce competitiveness policies may be encouraged to do so and that there may be a fund that can be used for this purpose, adding that income raised by the financial transactions tax could be used for such a fund. He said the financial incentives for the countries in question would be limited and subject to conditions.
In order to boost governance of the eurozone, France and Germany suggest a number of measures to be introduced after the European elections in May 2014, namely more regular eurozone summits; a “full-time” chair of the Eurogroup with “wider resources”; “dedicated structures specific to the euro area” within the European Parliament to ensure “adequate democratic control and legitimacy of European decision-making.”
Banking union. Welcoming finalisation of the legislative process to introduce a eurozone financial supervision system, the two countries call for a more integrated financial framework to restore normal lending conditions. They say that negotiations on harmonisation of bank resolution and deposit guarantee schemes should be completed by July 2013, as should the talks on direct bank recapitalisation by the European Stability Mechanism (EMS).
The two countries hope to see the introduction of a single bank resolution mechanism by the end of the current term of the European Parliament, based on the existing treaties and including “a single resolution board involving national resolution authorities and allowing quick, coherent and effective decision making at the central level”; contributions by the financial sector itself “thus pre-financing over time an appropriate and effective private backstop arrangement building on national private backstop arrangements”; the EMS should provide “additional public backstop” and may be connected with the bank resolution mechanism in the future.
Merkel said that solidarity should be shown and risks be assumed where decisions are taken and it is not possible for one to manage risks while another spends money. The statement makes no mention of a centralised restructuring authority or a special European fund to this effect, two measures that the Commission wants the summit to discuss in June. Hollande said it was very important for France and Germany to have agreed on a timetable and a mechanism without the need to change the treaties.
Youth unemployment. Tackling youth unemployment has been set by France and Germany as the top priority and at EU level this will involve setting up a guarantee of work experience. France and Germany want the €6 billion to be earmarked for tacking youth unemployment in the EU's budget for 2014-2020 to be fully utilised in 2014 and 2015. The two countries stress the importance of financing for small business, an area where they say the EIB could play a “pro-active” role, and ask the Commission to unveil for the June summit an investment plan of available resources and thematic priorities such as infrastructure, energy efficiency, renewable energy, innovation and the digital economy. (MB/transl.fl)