The leaders of the main European Union institutions have called on euro-zone countries to work towards collective decision-making on budgetary policy and risk-sharing between member states.
Amid doubt over the place of Greece in the euro zone, a new master plan to reinforce the euro’s foundations from European Commission president Jean-Claude Juncker and other institutional chiefs is cast as a road map to complete economic and monetary union and prevent a repeat of the debt crisis.
The plan would be completed within a decade but there is no specific time line for the adoption of the more ambitious elements of the package.
These call for the creation of a euro-zone “fiscal stabilisation” fund to assist member states struck by a very severe budget crisis.
Any such scheme would have to overcome German resistance to the notion of a “transfer union” between member states.
The plan also points to the creation of a euro zone treasury that would execute collective decision-making. Such a step would go much further than existing co-ordination measures, which already controversial in view of the external influence over national budgetary policy.
The document, published today before EU leaders meet this week in Brussels, was co-signed by European Council president Donald Tusk, president of the eurogroup of finance ministers Jeroen Dijsselbloem, European Central Bank president Mario Draghi and European Parliament president Martin Schulz.
Sovereignty-sharing
“For the euro area to gradually evolve towards a genuine economic and monetary union, it will need to shift from a system of rules and guidelines for national economic policymaking to a system of further sovereignty-sharing within common institutions, most of which already exist and can progressively fulfil this task,” said the 23-page document.
“In practice, this would require member states to accept increasingly joint decision-making on elements of their respective national budgets and economic policies.
“Upon completion of a successful process or economic convergence and financial integration, this would pave the way for some degree of public risk-sharing, which would at the same time have to be accompanied by stronger democratic participation and accountability both at national and European levels.”
While the objective behind a common fiscal stabilisation fund would be to improve “the cushioning of large macroeconomic shocks,” the report said more work was required to define the exact parameters.
However, it said such a scheme should lead lead to permanent transfers and and should not undermine the incentives for sound fiscal policy. The document also said a such a should not be an instrument crisis management, as that was the work of the European Stability Mechanism rescue fund.
National preferences
More joint decision-making would not lead to centralisation of “all aspects” of revenue and expenditure policies as member states would continue to make decisions according to national preferences and political choices.
“However, as the euro area evolves towards a genuine economic and monetary union, some decisions will increasingly need to be made collectively while ensuring democratic accountability and legitimacy.”
