17 May 2018

BIS: Olli Rehn: Europe, EMU and the banks

Mr Rehn said: “There is a strong case to move on with the ever-changing evolutionary Union. The dichotomy of 'federation or death' has been put forward too often, and frequently for propaganda reasons. But let me reveal you a secret: it is fake news.”

Namely, the euro area will not survive by simply becoming a federation or transfer union - but neither will it break up just because of not becoming one. Life is seldom black-and-white.

Instead, there is an evolutionary third way - what is needed is both a sense of direction and a sense of realism. The essential guiding principle in reforming euro area economic governance should be that steps towards increased solidarity through co-insurance and risk sharing are combined with increased responsibility and economic sustainability. Solidarity can only be built on solidity, for the sake of both economic sustainability and political legitimacy.

While the institutional reform of Economic and Monetary Union is important, Europe needs to work towards sustainable growth and job creation on all fronts. Putting the real economy and reforms truly centre-stage means that there is need to continue to work for a Europe that opens up citizens' opportunities to innovate and build new businesses, and thus create jobs, for a Europe that seeks to promote sustainable growth through free-trade agreements, despite headwinds; for a Europe where citizens and businesses can benefit from a genuine single market; and for a Europe that guarantees civil rights and social justice in the digital age.

These are the concrete, functional goals for sustainable growth and job creation that really matter to  citizens in Europe, which should always be the yardstick. They should be supported by rock-solid financial stability by completing the Banking Union. This is a policy agenda that can help making Europe relevant and moving on.

Full speech

© BIS - Bank for International Settlements