Today, the five Presidents – European Commission President Jean-Claude Juncker, together with the President of the Euro Summit, Donald Tusk, the President of the Eurogroup, Jeroen Dijsselbloem, the President of the European Central Bank, Mario Draghi, and the President of the European Parliament, Martin Schulz – have revealed ambitious plans on how to deepen the Economic and Monetary Union (EMU) as of 1 July 2015 and how to complete it by latest 2025. To turn their vision for the future of EMU into reality, they put forward concrete measures to be implemented during three Stages: while some of the actions need to be frontloaded already in the coming years, such as introducing a European Deposit Insurance Scheme, others go further as regards sharing of sovereignty among the Member States that have the euro as their currency, such as creating a future euro area treasury. This is part of the Five Presidents’ vision according to which the focus needs to move beyond rules to institutions in order to guarantee a rock-solid and transparent architecture of EMU. Delivering a Deeper and Fairer Economic and Monetary Union has been one of the top 10 priorities of President Juncker in his Political Guidelines.
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The Report sets out three different stages for turning the vision of the Five Presidents into reality (see Annex 1):
- Stage 1 or "Deepening by Doing" (1 July 2015 - 30 June 2017): using existing instruments and the current Treaties to boost competitiveness and structural convergence, achieving responsible fiscal policies at national and euro area level, completing the Financial Union and enhancing democratic accountability.
- Stage 2, or "completing EMU”: more far-reaching actions will be launched to make the convergence process more binding, through for example a set of commonly agreed benchmarks for convergence which would be of legal nature, as well as a euro area treasury.
- Final Stage (at the latest by 2025): once all the steps are fully in place, a deep and genuine EMU would provide a stable and prosperous place for all citizens of the EU Member States that share the single currency, attractive for other EU Member States to join if they are ready to do so.
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What’s in the Five Presidents’ Report concretely?
1. Towards an Economic Union of convergence, growth and jobs
This Union should rest on four pillars: the creation of a euro area system of Competitiveness Authorities; a strengthened implementation of the Macroeconomic Imbalance Procedure; a greater focus on employment and social performance; and on stronger coordination of economic policies within a revamped European Semester (see Annex 2). This should be put in place in the short run (Stage 1), on the basis of practical steps and the Community method. In the medium term (Stage 2), the convergence process should be made more binding through a set of common high-level standards that would be defined in EU legislation.
2. Towards Financial Union
Economic and Financial Union are complementary and mutually reinforcing. Progress on these two fronts must be a top priority in Stage 1. As the vast majority of money is bank deposits, money can only be truly single if confidence in the safety of bank deposits is the same irrespective of the Member State in which a bank operates. This requires single bank supervision, single bank resolution and single deposit insurance. We already have achieved the goal of single bank supervision. A Single Resolution Mechanism has been agreed with a Single Resolution Fund (which will become operational on 1 January 2016). As a next step, the five Presidents propose the launching of a European Deposit Insurance Scheme (EDIS) under Stage 1 which could be set up as a re-insurance system at the European level for the national deposit guarantee schemes.
3. Towards Fiscal Union
Unsustainable fiscal policies not only endanger price stability in the Union, they also harm financial stability. In the short run (Stage 1), the five Presidents propose the creation of an advisory European Fiscal Board which would coordinate and complement already existing national fiscal councils (see Annex 3). It would provide an independent analysis, at European level, of how budgets perform against the economic objectives set out in the EU fiscal governance framework. In the longer term (Stage 2), a common macroeconomic stabilisation function should be set up to better deal with shocks that cannot be managed at the national level alone. It would improve the cushioning of large macroeconomic shocks and make EMU more resilient. Such a stabilisation function could build on the European Fund for Strategic Investments as a first step, by identifying a pool of financing sources and investment projects specific to the euro area, to be tapped into.
4. Strengthening Democratic Accountability, Legitimacy and Institutions: From Rules to Institutions
Greater responsibility and integration at EU and euro area level means more interdependence. It also means better sharing of new powers and greater transparency about who decides what and when. It’s time to review and consolidate our political construct: the Report proposes greater parliamentary involvement and control – at national and European level especially when it comes to the Country Specific Recommendations, the National Reform Programmes and the Annual Growth Survey. In the short term (Stage 1), EMU needs a unified external representation – as outlined in the Political Guidelines of President Juncker. Today, the EU and the euro area, are still not represented as one in the international financial institutions, notably the IMF. A fragmented voice means the EU is punching below its political and economic weight. The Five Presidents also proposestrengthening the role of the Eurogroup. In the short run, this may require a reinforcement of its presidency and the means at its disposal. In the longer run (Stage 2), a full-time presidency of the Eurogroup could be considered.
Finally, while euro area Member States will continue to decide on taxation and the allocation of budgetary expenditures along national political choices, some decisions will increasingly need to be made collectively while ensuring democratic accountability and legitimacy. A future euro area treasury could be the place for such collective decision-making.
5. The Social dimension of EMU
One of the main lessons learned from the crisis is that a "triple-A EMU" must combine competitive economies that are able to innovate and succeed in an increasingly globalised world, with a high level of social cohesion. As President Juncker said in the European Parliament upon his election as Commission President: “I want Europe to be dedicated to being triple-A on social issues, as much as it is to being triple A in the financial and economic sense.” This means in particular that labour markets and welfare systems need to function well and be sustainable in all euro area Member States. Better labour market and social performance, as well as social cohesion should be at the core of the new process of “upward convergence” put forward in this report.
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