Brussels, 21/10/2015 (Agence Europe) - On Wednesday 21 October, the European Commission announced a series of measures requiring no treaty change aiming to stimulate economic convergence within the Economic and Monetary Union (EMU), including the creation of a European system of national competition authorities and a roadmap leading to a single representation of the eurozone within the IMF.
“We are not reinventing the wheel” by making changes to the Stability Pact: the aim is for the budgetary and macro-economic rules and commitments already in place to be applied, said the Commissioner for the Euro, Valdis Dombrovskis. The measures put forward by the Commission, entirely from the report of the 'five presidents' on the reinforcement of economic and monetary union (see EUROPE 11414 and 11340).
One of the main proposals concerns the creation, at EU level, of a European system of national competition authorities responsible for providing independent expertise on performance and the reforms of the member states affecting all competitiveness factors. It will cover the process of determining salaries, but will not interfere in the role of the social partners. It will be the responsibility of the Council of the EU to recommend that the member states set this network in place.
The most recent reform of the Stability and Growth Pact ('2 pack' and '6 pack') brought in the creation of national budgetary committees tasked with proposing an independent assessment of the budgetary and economic performance of member states which have adopted the single currency. Wishing to build on what is already in place, the Commission has announced that it will create a “consultative European budgetary committee”. This committee, which will be made up of five eminent experts, will act in an advisory capacity to contribute to multilateral surveillance within the eurozone. Its duties will include feeding into an informed debate on the implications of the national budgetary policies at eurozone level. Work to set this committee in place will start without delay so that it can be up and running “next year”, Dombrovskis said.
The reform of the Pact also brought in a new procedure aiming to identify macro-economic imbalances. Arguing that this procedure has played a “decisive” role in the flagging up of major imbalances and promoting an effective adjustment of countries such as Spain and Slovenia, the Commission nonetheless takes the view that this procedure could be made “more solid”. Amongst other things, it no longer rules out putting the countries concerned into the 'corrective' plank of the excessive imbalance procedure or opening excessive deficit procedure in the event of “serious” macro-economic imbalances jeopardising the functioning of the EMU.
External representation of the eurozone. The Commission states that the progress made towards greater internal integration of the eurozone must also be felt on the outside.
The European institution has therefore adopted a draft decision of the Council of the EU aiming to set in place - on a gradual basis, between now and 2025 - a unified representation and compositions of the eurozone within the IMF, until the eurozone becomes a full member of this institution. Amongst other things, the President of the Eurogroup would have a seat on the governing council of the IMF as administrator of a 'eurozone' group, following the establishment of one or more groups made up exclusively of eurozone countries. Until this can happen, the eurozone will be represented on the IMF council by a eurozone country which is already a member of the council for a mandate of two and a half years. Additionally, the Eurogroup President would express the opinions of the eurozone within the IMF board.
“Don't confuse the two things: one is representation in the governing council and the International Monetary and Financial Committee where, at the end of the day, it would be the Eurogroup president, at least this is our proposal, to represent the euro area. Then, on the number of constituencies, what the current proposal says is to move forward one or several constituencies constituted only of eurozone countries. We are not setting the specific design of the constituencies”, Dombrovskis said.
Depending on future developments of the EMU or of the international financial architecture, the Commission could consider that further initiatives would be useful to reinforce the external representation of the eurozone in other international bodies.
Banking union. The Commissioner confirmed that the Commission would be pushing ahead to complete banking union in the eurozone by means of the creation of a 'deposit guarantee' plank. Our proposal, which will be announced “before the end of 2015”, will be based on the creation of a guarantee mechanism for the national deposit guarantee schemes, he said. In order to reassure Germany, which is opposed to any subsequent pooling of banking risks (see EUROPE 11388), he clarified that at the same time, the objective was to reduce micro-prudential and exposure risks inherent to the banking sector. Additionally, the latest revision of the 'deposit guarantee' directive will be fully applied, he stressed (see EUROPE 11061).
The report of the 'five presidents' recommends a second phase, after 2017, to lead into the completion of the EMU by 2025, through more ambitious measures which will require treaty change, such as the creation of a specific budget for the eurozone. Wishing to collect as many stakeholder opinions as possible before taking position, the Commission is to launch a public consultation on the EMU 2025 and will, in mid-2016, set up a group of experts responsible for discussing the legal, economic and political conditions to determine the outline of these more ambitious proposals. This double exercise will feed into the Commission's reflection which will lead, in spring 2017, to the publication of a White Paper aiming to define orientations. (Original version in French by Mathieu Bion)