Brussels, 24/07/2015 (Agence Europe) - In the light of the latest episode of the Greek crisis, the Jacques Delors Institute has identified three major challenges to be tackled to rectify shortcomings in economic and monetary union (EMU), namely boosting investment, pursuing reforms to promote convergence and political integration that goes hand-in-hand with greater democratic legitimacy.
In a column published on Wednesday 22 July, the Jacques Delors Institute says that although there are things that are specific to Greece, the crisis in the country is nevertheless symptomatic of the deeper faults in the nature and functioning of the eurozone and speedy action is required to get out of the rut caused by the original sin of setting up a single currency without a true economic union.
For investment, the authors endorse the formula expressed by the head of the ECB, Mario Draghi, that investment is demand today and supply tomorrow. They recommend a targeted strategy at European level to boost investment, a strategy based on regulatory clarity in domains like energy and the digital economy, and the availability of capital. The Juncker Plan to attract €315 billion in extra investment over three years is described as “useful,” but in the absence of new money, it needs its own resources, which could come in the form of future tax receipts or unused Structural Funds (see EUROPE 11364). Thus to remedy the investment deficit that is raging in Europe, the Jacques Delors Institute calls for the establishment of a European Monetary Fund, directed by a European finance minister and operating with a limited amount of common eurozone debt.
The authors say the catalogue of scattered reforms has to be abandoned that starts from the principle that there is a single solution that all European nations could and should implement. Convinced that reforms do not all have to be synonymous with deregulation or asset stripping, they hope to see the drawing up of a reform programme that gives social justice pride of place and is based on a demanding European regulatory model.
Any initiative leading to a deepening of EMU should be accompanied with a boosting of democratic legitimacy through greater involvement of the European Parliament and national parliaments. The institute points out that eurozone political union implies that the eurozone should not solely be the sum of its national components, but also an autonomous political entity, which does not rule out changes to the treaty in the medium-term to establish the legal foundations of closer political union.
The Franco-German powerhouse. France and Germany will act as an engine, but the Jacques Delors Institute deplores the way that the two biggest eurozone economies have sharply differing views on how to deepen the single currency area. The authors explain that France is fractious about greater sharing of sovereignty, and Germany is fractious about greater sharing of risks. (Mathieu Bion)