10 December 2013

BDI/MEDEF: Strengthening the European monetary union - A call to the European Council

Prior to the Council meeting on 19/20 December, the Federation of German Industry and the Movement of the Enterprises of France have proposed three key objectives to the German and French governments, in order to stabilise the eurozone in the long term.

After years of crisis, the Member States of the EU are currently emerging from the clutches of recession. With the acute bailout measures and the first stages of reforms taking effect in member countries, the opportunity must now be grasped to create a new basis for long-term and sustainable growth in Europe. The current reforms are not yet sufficient and are not being coordinated effectively enough. The lack of competitiveness in many EU member countries poses a long lasting threat to the euro and thus to the European Union.

The organisations propose three key objectives in order to stabilise the eurozone in the long term:

(1) The implementation of national structural reforms should be supported by the consistent use of existing EU instruments and the introduction of new institutional mechanisms.

The reforms already agreed aimed at strengthening the coordination of economic and financial policy and monitoring budget policies and debt trends are an important step towards stabilising the eurozone. The resulting country-specific recommendations now have to be implemented. The following measures in particular will be necessary to achieve this:

• broadening of country-specific monitoring;
• strict application of the agreed regulations and sanction mechanisms to stabilise and reduce national debt with the aim of achieving balanced national budgets;
• systematic and mandatory use of appropriate instruments already created, particularly the stability and growth pact.

(2) The European Economic and Monetary Union should be supplemented rapidly with a powerful European Banking Union.

The provision of sufficient financing to the real economy by banks and financial markets is crucial for competitiveness and growth. The rapid completion of the banking union is crucial to restoring confidence in the financial sector.  A European resolution mechanism should be agreed before the end of this year if possible. It must help to re-establish the liability principle. To this end, a mandatory liability cascade must be created and be harmonised between member states. Specifically, it must be ensured that the owners and creditors of a bank bear the losses incurred for restructuring or resolution in the first instance. Such a liability sequence would also be in keeping with the no-bailout clause enshrined in Art 125 of the TFEU and would strengthen the market discipline of banks.

(3) A decision of the Council to renounce to any further taxation increase within the EU as well as to taxation projects which could have very detrimental effects on the economy such as the Financial Transaction Tax (FTT) project.

Regulation for banks and the financial markets must take account of the overall and reciprocal impact of the many individual measures, in order to avoid making financing conditions more difficult for the economy. BDI and MEDEF therefore strongly oppose the proposal for a Directive introducing a Financial Transaction Tax (FTT) in some Member States. This FTT would deeply affect non-financial players and would undermine the attractiveness of the countries concerned, at a time when Europe needs to attract more capital and investments, and strengthen its competitiveness.

Full paper

© BDI - Federation of German Industry