01 June 2017

Pierre Moscovici: Now Europe is recovering, it’s time to build a better euro

The European Union must use the current recovery to press ahead with long overdue economic reforms, EU Economic and Financial Affairs Commissioner Pierre Moscovici told the Brussels Economic Forum.

Mr Moscovici was echoed by finance ministers and other panellists at the forum in saying that there was a unique opportunity to enjoy both the economic upturn and the political turnaround in Europe to complete the euro area reform process. “We have learnt the hard way what it means to be part of an incomplete Economic and Monetary Union,” Mr Moscovici said. “Now it is high time to take the steps that are badly needed to deliver on what the euro and EMU were made for: shared prosperity.”

He said that despite the many successes of the euro, unemployment remains high, inequalities are rising, the financial sector is fragmented, and weaknesses remain in public finances and euro area governance. “These tell the story of the still incomplete architecture of economic integration, and they call for action,” he said. “The “Monetary” pillar of the EMU is well developed. But the “Economic” component is lagging behind.”

The Commission’s reflection paper on the future of the economic and monetary union was released just the day before the BEF, on 31 May, setting out ways forward to complete the economic integration. Mr Moscovici prioritised building a genuine Financial Union, with a complete Banking Union and the Capital Markets Union. 

He called for a strengthening of economic policy coordination, while adding that, “We do not need more rules and bureaucracy; what we need is stronger national ownership…and we need stronger democratic accountability.” Mr Moscovici also backed the idea proposed by new French President Emmanuel Macron for the creation of a euro area Finance Minister heading a euro area Treasury, possibly with a euro area budget.

Italian Finance Minister Pier Carlo Padoan agreed that structural reforms had to be pushed once the economic situation had stabilised, as he had done with Italy’s chronic debt. “Yes, Italy’s public debt is huge, but it is adjusting and falling,” he said. The recession since 2007 was Italy’s biggest in peacetime, during which it had lost 10% of its GDP. “There is no short cut,” he said. “It is a patient, medium-term, stubborn task. The bottom line, for a country with a high debt and structural problems, is that there is almost an obliged narrow path.”

Belgian Finance Minister Johan Van Overtveldt urged member states to take responsibility for their own reforms and not claim that the EU was forcing them into adjusting. “We should stop using Europe as a scapegoat for doing things that need to be done,” he said.

Adam Posen, the President of the Peterson Institute for International Economics said the economic and political recovery was “an opportunity for the EU to rally against the evils around it.” After the French elections, he felt populism had crested. “All credit to the people of Europe who voted against the fascists,” he said. But like the others, Mr Posen said the time was to focus on deliverables. “People want results,” he said. “Europe needs to focus on delivering results, not worry about forms. Do things that demonstrate to average Europeans that Europe can do things. Make it tangible to the European people.”

Deutsche Bank’s Chief Regulatory Officer Sylvie Matherat hailed the progress made on Banking Union. “EU Banking Supervision is a big success: same rules, same application in member states,” she said. Looking ahead, Mrs Matherat said banks and policy makers should be more confident. “It is not less Europe that we need but more Europe. That means more integration, more consolidation,” she said. “The solution is growth. If people have jobs, it will be much easier for everyone.”

Pierre Moscovici's full speech

© ECFIN