European Commission roadmap to deepen the EMU: CESI expresses cautious optimism

On Wednesday, the European Commission published a long-awaited roadmap for deepening Europe's Economic and Monetary Union (EMU). Referring to a "window of opportunity" for action, the European Commission proposes to establish a European Monetary Fund, the integration of the Stability and Growth Pact (SGP) into the EU's legal framework and new budgetary instruments for a more stable euro area within the EU framework. The European Commission also wishes to create a new post of European Minister of Economy and Finance to implement a deeper EMU. In a first reaction to the proposals made by the Commission, CESI Secretary General Klaus Heeger expressed cautious optimism.

European Commission roadmap to deepen the EMU: CESI expresses cautious optimism

In the European Commission’s new EMU package:

• the European Monetary Fund (EMF) should help safeguard the stability of the euro area by assisting Member States to regain or maintain access to sovereign bond markets. The EMF would build on the existing ESM architecture.
• the integration of the SGP into the EU’s legal framework would, according to the European Commission, “support sound fiscal frameworks at national level.”
• the new budgetary instruments for a stable euro area within the EU framework could support Member States to make structural reforms, provide a dedicated convergence facility for Member States on their way to joining the euro, be a “backstop for the Banking Union”, and act as a stabilisation function in order to protect investments in the event of large asymmetric shocks. This includes the idea of a new European Investment Protection System which Member States could benefit from, with conditions.

The European Minister of Economy and Finance could serve as Vice-President of the European Commission and chair the Eurogroup, thereby bringing together existing responsibilities and available expertise to strengthen the “coherence, efficiency, transparency and democratic accountability of economic policy-making for the EU and the euro area, in full respect of national competences.”

“CESI has been lobbying intensively for securing social investment, whether public or private, and functioning and efficient administrations, both tools for societal cohesion and social and economic resilience in times of crisis. The proposals submitted today are therefore generally to be welcomed as a step in the right direction. This is especially true for a possible new European Investment Protection System, which could provide an important stabilising financing tool for Member States, if the eligibility criteria from the tool are not overly restrictive”, CESI Secretary General Klaus Heeger stated.

He, however, warned against the unquestioned and undifferentiated continuation of austerity policies. “Particularly in view of the sluggish recovery in some Member States and against the background of the just proclaimed European Pillar of Social Rights, policies which aim at solely achieving budgetary surpluses simply remain questionable. In this sense, the proposal to integrate an unchanged SGP into the EU legal framework is counterproductive. Numerous legal provisions at both European and national levels celebrate budgetary surpluses as the holy grail of any policy orientation. To insert the SGP into the EU’s legal framework would mean nothing else then carving into stone a dogma which should actually be subject to more investment oriented reflections.”

The full EMU package with supporting documents is available on the European Commission’s website.

Picture: Klaus Heeger © CESI 2017