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Vice-President of the European Commission, EU Justice Commissioner
Towards a federal Europe: what we can learn from our central banks
25th Anniversary of the Österreichische Nationalbank/Austrian Central Bank Representative Office in Brussels
3 December 2013
The way monetary policy works in the euro area today is really a model for how we should work together in our Union.
The Maastricht Treaty left economic and fiscal policy at national level. We built a house without a solid foundation. And the crisis brutally exposed this fault.
I urge Member States to adopt the Commission's proposal for a Single Resolution Mechanism.
We have to make sure that democracy keeps up with reforms. Complexity is an enemy of democracy. Clarity and transparency, however, are friends of democracy. Whether it is about laying off civil servants, privatising state companies or raising the retirement age – questions like these need to be debated in the open, in the European Parliament. They must not be decided by unaccountable experts behind closed doors.
In the field of economic and fiscal policy, we need a European Finance Minister who would have to be answerable to the Parliament.
Ladies and Gentlemen,
I am honored to address you today and to be part of your celebrations. The 25 years since the opening of your representative office in Brussels have certainly been eventful. Europe was united during this time: the Iron Curtain came down, and our Union grew from twelve member states back in 1988 to 28 today.
Through your representation here, you at the Oesterreichische Nationalbank have been right at the center of this process of change and growing integration. First, by helping to master the task of Austria's accession to the EU and then of course by playing a key role in the introduction of the Euro.
The financial and economic crisis we are starting to overcome has given a further big push to European integration. This is particularly true of economic and fiscal policy and with regard to the regulation of banks. I personally think that the way monetary policy works in the Euro area today could be a model for working together in our Union, also in other fields.
1. Driving integration in economic and fiscal matters
Since the outbreak of the crisis, integration in economic and fiscal policy has reached an unprecedented level. This has culminated a few weeks ago with the European Commission presenting its analysis of Euro-countries' draft budgetary plans and issuing its recommendations even before national Parliaments vote on these. This is a huge step taken. A step that would have been unthinkable even a few years ago.
At the same time, we are setting up a European system for the supervision and the resolution of banks. This will take banking regulation to a whole new level of integration.
The reason why such a revision was possible is simple: the crisis has shown very clearly that no country is an island. Decisions taken in one Member State have an impact on the others. That is why we need to know well in advance what is going on in Member States so that we can spot problems early and prevent them from escalating as badly as they have in the past years.
In fact, what we are doing in these months is starting to fix the deficiencies that the Treaty of Maastricht had left us with. Maastricht established a common currency. But it left economic and fiscal policy solely at national level. And the crisis exposed this fault brutally.
We are now working to build a solid foundation. By coordinating the economic and fiscal policy that underpins our common currency. And by building a real federal shock absorber for our banking system.
The Single Supervisory Mechanism is in place now, but we have to go further. We need a common system to deal with failing banks. I therefore urge Member States to overcome their selfish posturing and adopt the Commission's proposal. The Heads of State and Government have given their commitment. It is for Member States to reach agreement now and to deliver.
2. The Eurosystem as a model
Monetary policy gives interesting lessons. Integration has progressed into a federative system. The European Central Bank has not replaced national central banks. It works side by side with them in the the Eurosystem.
The Eurosystem is very typical of the European way of doing things. The national central banks, represented in the ECB, have a say in its decision making. At the same time, they work jointly with the central level, interpreting monetary policy and carrying national responsibilities.
At the same time the national central banks develop their own areas of expertise. The Austrian central bank designed our Euro notes by the talent of Robert Kalina. The Austrian central bank is famously known for the excellent knowledge of central and Eastern Europe. This knowledge results in high-quality academic research which central bankers, regulators, investors, economists and politicians from all over the Euro-area benefit from.
It is this kind of cooperation that can serve as a model. For example in the policy field I am responsible for: the proposal for the creation of a European Public Prosecutor builds on the same national/EU collaboration. To protect the EU budget against fraud, delegated European Prosecutors will carry out investigations and prosecutions in Member States, using national staff and applying national law. Their actions will be coordinated by the central European Public Prosecutor to ensure a uniform approach throughout the Union.
If we want to strengthen European integration, we must be ready for institutional innovation and creativity. Simplistic top down approaches will have difficulties in finding broad support. But institutional systems which blend the European perspective and the national practical experience into a new common framework work efficiently and can be the new golden standard.
3. The need for a political union
Such steps towards closer integration are of course encouraging, but they are only a start. We will need many more changes, bold changes. And we will have to make sure that democracy keeps up with reform.
This is why we have to go a step further. I personally call for a real European Finance Minister in a real European government. That way, coordinated economic policy gets a face, someone who acts in the interest of all Member States and speaks for all of them at international meetings.
This kind of set-up will only work, however, if we give citizens the democratic control. Before you can exercise such a control, you need to know about the way decision-making processes and institutions are functioning. Today, many decisions are taken in a way that is not visible or not understandable for citizens. And let's be honest, the powers which take the decisions lack accountability.
Sometimes, complexity is an enemy of democracy. Clarity and transparency will be needed. A European Finance Minister would have to answer to the Parliament. The elected Parliamentarians would have to explain to their voters.
To ensure this, we need a true Political Union. To me this means a political federation with the Commission as government and two chambers – the European Parliament and a "Senate" of Member States.
This vision is of course one of many for the future of Europe. Visions and proposals for the future need to be debated. I hope that the campaign for the 2014 European Parliament elections will serve as the ideal occasion to sort out what kind of future we want to share. Building on the experience gained during the financial crisis, we have the chance to decide upon the right solutions.
Thank you for a continuous support, also in this new institutional voyage.