Enhancing economic and fiscal integration in ‘Stage 1’ of the Five Presidents’ Report
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Effective fiscal coordination and the success of the new advisory European Fiscal Board will depend on the political will at the Member State level;
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Imbalances in the euro area will probably continue to be a source of instability. Strengthening the Macroeconomic Imbalances Procedure is unlikely to encourage more symmetrical adjustment between euro area Member States;
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The establishment of National Competitiveness Boards must be accompanied by a set of clear objectives of how they will improve policy making and increase national ownership of those policies; measures to improve competitiveness need to stress solutions that enhance productivity;
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The Expert Group’s White Paper in 2017 will need to achieve the right balance between further economic and fiscal integration measures and appropriate democratic and accountability structures.
Creating a ‘Financial Union’
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A European Deposit Insurance scheme (EDIS) is a useful addition to the Banking Union and the risk reduction agenda will contribute to reducing moral hazard concerns held by some Member States;
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Capital Markets Union will benefit the UK as the City of London is Europe’s leading financial hub. If properly constructed it would be able to act as a shock absorber, but its ability to do so may be limited in a crisis.
Longer term fiscal and democratic structures in ‘Stage 2’ of the Five Presidents’ Report
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‘Fiscal Union’ is a nebulous concept but the stabilisation mechanism proposed in the Five Presidents’ Report is a pragmatic way forward. A fiscal union that includes the pooling of funds will be unlikely to succeed in the short term, and certainly not before risk reduction measures have been put in place;
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It is for eurozone Member States to decide the appropriate mechanisms of democratic accountability needed to support their chosen level of fiscal integration. So far, these mechanisms have not kept pace with the EMU crisis architecture and this undermines the legitimacy of EMU for EU citizens. Any new structure should be accompanied by a clear mandate from the citizens of the eurozone countries;
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The creation of a eurozone parliament, treasury or finance minister would require treaty change.
Full report
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