In the past few years, one of Europe’s greatest achievements, the Euro, has been put at risk by an unprecedented economic and financial crisis that has shaken the credibility not only of the European Economic and Monetary Union (EMU) but also of our 60-year-old integration process. Many of the weaknesses of the euro area became evident and many have the same root: the euro area is a peculiar monetary union with a single currency without a central economic and fiscal authority and with substantially independent national fiscal and economic policies. Moreover, divergences between Member States’ economies threatens social cohesion across the Union and make some Europeans question the meaning European solidarity.
Since the outburst of the crisis in 2008 the EMU has been reinforced. A European Stability Mechanism has been created to ensure support to euro countries at risk of financial collapse. The so-called European Semester has been established to ensure a stricter control of national budgets. A nascent Banking Union provides now taxpayers with some degree of protection. But the main structural weaknesses of the euro area and the root causes of its incapacity to accommodate diverse economies and properly address economic crisis with an early and resolute response have not been solved.
The EMU needs to complement its current rules-based system resting on the Stability and Growth Pact with a real European economic government, equipped with the political and financial means enabling it to live up to its missions and supported by proper parliamentary legitimacy.
1. A European Economic Government, with a European Finance Minister, acting also as Vice-President of the European Commission, vested with powers of coordinating national budgetary and economic policies, formulating and implementing European economic strategic policies, managing the different EMU financial instruments and representing the euro in international financial institutions.
2. A budget for the euro area aimed at financing European strategic investments, fostering economic convergence among euro countries and incentivising national governments to implement European economic policies. Such a budget should be sizeable enough to have macro-economic effects (i.e. be multiples of the current European Union budget) and be managed as to ensure implementation of the euro area’s policies and projects autonomously from Member States.
3. A system of genuine own resources ensuring that European public goods are financed with European revenue, thus replacing the current system of national contributions, putting an end to the ‘juste retour’ rhetoric and protecting the EMU’s vital interests. They may consist of European taxes (European Financial Transaction Tax, European bracket on a European Common Corporate Tax, revenue from the European Emissions Trade System, etc.) and/or come from a general borrowing capacity (European bonds).
4. Automatic macro-economic stabilisers (e.g. a European Unemployment Insurance Scheme), preventing snow-ball effects of economic shocks affecting only one part of the EMU and ensuring solidarity between EU citizens.
5. Proper parliamentary control, through a euro configuration of the European Parliament, with the power of co-decision with the Council on all matters regarding the Economic and Monetary Union. Qualified Majority Voting should be used by the Council in all areas where unanimity still prevails.