The future of EMU: deepening the debate
European Commission - SPEECH/13/389 07/05/2013
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Vice-President of the European Commission and member of the Commission responsible for Economic and Monetary Affairs and the Euro
The future of EMU: deepening the debate
Conference "the Blueprint for a deep and Genuine EMU; debating the future economic, monetary, banking and political union"
7 May 2013
Ladies and Gentlemen,
Let me kick this panel off by connecting the governance reform of EMU to the present policies and economic challenges of the EU, especially of the eurozone. In my view, the long-term of the EMU can only be ensured provided that the short-term is on a solid and sustainable foundation.
Last Friday I presented our spring economic forecast, which provides a baseline for the policy recommendations under the European Semester.
After a protracted recession, we expect the EU economy to stabilise in the first half of this year, with growth gaining further momentum next year. Unfortunately, unemployment is forecast to stay at the unbearable level of 11% in the EU and 12% in the euro area this year. We expect a gradual turnaround to begin only next year as the recovery gathers ground.
Facing this challenge, we must do whatever it takes to overcome this unemployment crisis. Each EU institution will need to work within its own mandate, each Member State both on its own challenges and jointly together on our common economic and employment challenges.
The EU's policy mix is focused on sustainable growth and job creation. Monetary policy is accommodative and will remain so. In fiscal policy, consolidation is continued, even though at a slower pace, while ensuring the medium-term sustainability of public finances.
The slower pace of consolidation has been made possible by three factors, which are profoundly linked to the governance reform of EMU:
• first, the increased credibility of fiscal policy that the euro area member states have achieved since 2011;
• which, second, has reduced macro-financial risks and enabled the ECB to take further decisive action to stabilise the markets; and
• third, the reform of EU economic governance, which now provides an effective medium-term framework for a gradual fiscal adjustment and the advancement of structural reforms
Next, we must resolve the current liquidity trap, or the financing trap of households and enterprises, especially in southern Europe, using all possible ways and means at the disposal of the EU institutions. A number of initiatives have been introduced recently to ease the financing conditions of households and enterprises, including through the increase of the European Investment Bank capital by 10 billion euro.
Furthermore, to unlock Europe's growth potential, structural reforms need to be pursued intensively. Active labour market policies, essential in combatting youth unemployment, must be further developed as an absolute priority. We work hand-in-hand with President Barroso and my colleague Commissioner Laszlo Andor to ensure that work to deepen the economic union adequately reflects this 'social dimension' of the EMU.
This current context obviously provides the point of departure for the Commission's Blueprint for a Deep and Genuine EMU. It is worth recalling that we have already substantially reinforced our economic governance.
We have put in place a more robust and credible system to ensure sound public finances and to pursue structural reforms. And we have created a framework for preventing and correcting macroeconomic imbalances.
The new toolbox is already in action to support sustainable growth and consistent consolidation of public finances. It provides a necessary foundation for further steps to rebuild the EMU.
What are the possible next steps?
In the short-term, we need to improve governance of the European financial system. The construction of a banking union will reinforce financial stability through more uniform and reliable arrangements for the supervision and resolution of banks. It will further reinforce financial stability by diluting the link between banks and the national sovereign.
Since the beginning of the crisis we have been redesigning Europe’s financial architecture, not least through the recent agreement on a Single Supervisory Mechanism and the establishment of the European Stability Mechanism last year. Next we move on with the second pillar of the banking union – the single resolution mechanism, with a single resolution authority and common resolution fund, financed through levies on the sector itself, to deal with failing banks in an orderly manner.
The possibility and rules for direct recapitalisation of banks by the ESM is another important feature of the banking union we are currently building.
Taken together, these steps towards the banking union represent a decisive contribution to the repair of the banking system in Europe.
What about the broader economic union? Where should we go from here? Some difficult choices will have to be made.
The Blueprint is based on the guiding principle that any steps towards increased solidarity and mutualisation of risk would have to be combined with increased responsibility and discipline: that is, with further sharing of sovereignty and deeper integration of decision-making. The Convergence and Competitiveness Instrument, which foresees targeted financial support for structural reforms, is a good example of how increased responsibility and increased solidarity can go hand in hand.
Our vision is firmly based on the Community method, which is the only way to ensure truly sustainable policy instruments and democratic legitimacy and accountability. This also includes bringing the current intergovernmental instruments into the Community framework.
We also emphasise that with the further development of EMU, we must always ensure the integrity of the EU as a whole.
Finally, in order to promote the interests of EU citizens in the global scene, the euro area should be represented in a manner commensurate with its economic weight. To achieve these objectives, the Commission will present proposals for the external representation of the euro area in international economic and financial organisations and fora.
To conclude, as has been said, "the only place where success comes before work is a dictionary". So we have much work ahead of us to take forward the rebuilding of the Economic and Monetary Union. The debate is on-going in many circles. Let's pursue it with vision and open mind.
Dear friends, I am looking forward to an enlightening discussion this morning and to listening to your views on the ways ahead. Thank you!