Following the Commission’s White Paper on the Future of Europe presented on 1 March, the Commission now sets out possible ways forward for deepening Europe’s Economic and Monetary Union.
Today’s reflection paper builds on the Five Presidents’ Report of June 2015 and is intended both to stimulate the debate on the Economic and Monetary Union and to help reach a shared vision of its future design. Paying due attention to the debates in Member States and to the views of other EU institutions, the paper sets out concrete steps that could be taken by the European elections in 2019, as well as a series of options for the following years, when the architecture of the Economic and Monetary Union would be completed.
Valdis Dombrovskis, Vice-President for the Euro and Social Dialogue, Financial Stability, Financial Services and Capital Markets Union, said: “The euro is one of Europe’s most significant achievements. It is much more than just a currency. It was conceived as a promise of prosperity. To keep that promise for future generations, we need the political courage to work on strengthening and completing Europe’s Economic and Monetary Union now. Today’s reflection paper offers various ideas that should help building a shared vision for the euro as well as concrete steps to achieve it.”
Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs, said: “The euro is already a symbol of unity and a guarantee of stability for Europeans. We now need to make it a vehicle for shared prosperity. Only by reversing economic and social divergence in the euro area will we be able to defeat the dangerous populism that this fuels. The time has come to complete the journey we started at Maastricht towards a genuine economic and monetary union, with strong institutions and democratic accountability.”
The euro is a success story on many levels: it is shared by as many as 340 million Europeans in 19 Member States. Seven of the Member States that joined the EU in 2004 have already adopted it. And yet it is only 25 years since the Treaty of Maastricht paved the way for the single currency and only 15 years since the first coin was used. The euro is the second most used currency around the world, it has brought stable prices and has become a part of daily life for most Europeans.
But the tough times the euro area has endured over recent years mean it is not always perceived as such, though today, support for the common currency is back at the highest level since 2004 (at 72 % of euro citizens). The global financial and economic crisis that started in the United States in 2007-08 led to the worst recession in the European Union’s six-decade history. Member States and EU institutions took strong political decisions to preserve the integrity of the euro and to avoid the worst and these reforms are showing results. But the crisis is not over as long as unemployment remains so high. In order to deliver even better for all citizens, the governance of the euro needs further reform.
The options proposed in the reflection paper are intended to help build a broad consensus on how to take on the challenges ahead and to give a fresh impetus to this important debate.
Completing the Economic and Monetary Union is not an end in itself but is needed to provide jobs, growth, social fairness, economic convergence and financial stability. Responsibility and solidarity, risk reduction and risk-sharing will have to go hand in hand. The Economic and Monetary Union should remain open to all EU Member States, and the decision-making process must become more transparent and democratically accountable. These are guiding principles for the work ahead. Finding a broad political consensus on the direction of travel and having an overall roadmap with clear sequencing will be crucial for success.
Moving ahead would involve taking steps in three key areas:
1) completing a genuine Financial Union
An integrated and well-functioning financial system is essential for an effective and stable Economic and Monetary Union. Building on the momentum of what has already been achieved in recent years, a consensus needs to be found on the way forward. This includes moving ahead with elements that are already on the table and agreeing on additional steps to take between now and 2025. This will involve completing the Banking Union and making progress on reducing and sharing risks in the banking sector, with measures to make European banks even more resilient. In order to provide more diverse and innovative financing opportunities for the real economy, including through capital markets, delivering on Capital Markets Union is also paramount.
2) achieving a more integrated Economic and Fiscal Union
Already the Five Presidents’ Report recognised the convergence towards more resilient economic and social structures in Member States as an essential element for a successful Economic and Monetary Union in the long run. Member States could strengthen already existing elements, such as the European Semester of economic policy coordination or the link of financial support from the EU budget to structural reforms. But Member States could also decide to improve the capacity of macroeconomic stabilisation of the euro area. The paper outlines several different options for this, which the Commission will look into.
3) anchoring democratic accountability and strengthening euro area institutions
For the Economic and Monetary Union to be stronger, Member States must accept to share more responsibilities and decisions on euro area matters, within a common legal framework. This could be through the EU Treaties and its institutions, an intergovernmental approach or, as is the case today, a mix of both. Further political integration could involve a rethinking of the balance between the Commission and the Eurogroup and could justify the appointment of a full-time permanent Eurogroup chair, as well as unifying the euro area’s external representation. The idea of a euro area Treasury – possibly with a euro area budget – as well as a European Monetary Fund are also discussed in the public debate, and could be considered at a later stage of the deepening of Economic and Monetary Union, within the EU framework.
This reflection paper is the third in the five-part series of papers announced in the White Paper on the Future of Europe, which set out the main challenges and opportunities for Europe in the coming decade. The White Paper marked the beginning of a process for the EU at 27 to decide on the future of their Union. To encourage this debate, the European Commission, together with the European Parliament and interested Member States, is hosting a series of ‘Future of Europe’ Debates across Europe’s cities and regions.
Today’s reflection paper is an invitation for everyone to express their views on the future of our Economic and Monetary Union, as part of the broader debate on the future of Europe. The way forward must be built on a broad consensus and take into account the global challenges ahead. In this regard, the reflection papers on harnessing globalisation and the social dimension of Europe, as well as the upcoming reflection paper on the future of EU finances, will also feed the discussion on the future of our Economic and Monetary Union.
The Commission will also publish a reflection paper on the future of Europe’s defence.