In his speech, the ECB's González-Páramo took a step back from the crisis and reflected on what it has taught us so far about economic and monetary union in Europe.
Speaking at the Oxford University European Affairs Society in Oxford, Mr González-Páramo focused on three areas:
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First, membership of EMU entails much deeper policy changes than were originally realised. Effective governance of an economic area of such importance requires much closer economic and financial union.
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Second, in response to the crisis, a much more radical change in euro area governance has taken place than many observers seem to acknowledge.
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Third, and contrary to a strand of current thinking, the Treaty prohibition on monetary financing is supporting rather than threatening euro area integration. In the euro area, the central bank is “doubly removed” from the political systems of individual countries: it is not only constitutionally independent, but also elevated to the supranational level. Euro area governments cannot expect the ECB to finance public deficits. By forcing policymakers to focus their reform efforts on the right priorities, the monetary financing prohibition offers an incentive to closer economic and financial union.
The key theme that has run through all remarks is that, from every perspective, much closer economic and financial union is essential for the euro area. Important steps in this direction have already been taken. Europe is ahead of others in addressing its imbalances. The challenge looking forward is to complete the process towards closer union and not settle for the “quick fix”.
The people of Europe want closer cooperation in economic and financial matters. Eurobarometer surveys find cross-country majorities in favour of closer cooperation to end the crisis. And this is ultimately unavoidable, given the state of political union between countries that monetary union de facto creates. It is now a time for politicians to be bold and courageous, to recognise these trends, and to complete as soon as possible the great project begun 60 years ago towards “ever closer union”.
Full speech
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