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There is no 'single issue movement' alone – be it fiscal discipline alone or be it debt mutualisation alone – that can solve this crisis. There is no silver bullet. We need to continue our comprehensive crisis response, and intensify and fine-tune it, as necessary.
It is all about reforming the European social and economic model. Not nostalgically clinging to the status quo, because that would mean a permanent decline. Not dismantling the European model, because we believe in the combination of entrepreneurial drive and social justice. But indeed reforming and modernising the European model of social market economy.
From this vantage point, let me focus on the five work-streams that together form our comprehensive policy response [abridged].
1. We need to maintain the pace of economic reform to support the rebalancing of the eurozone. The European economy cannot be rebalanced in isolation from the world economy. The eurozone is large open economy: because the eurozone trades a lot with the rest of the world, adjustment channels are strongly influenced by economic interdependence. We must be cautious not to lose our international competitiveness, as we are witnessing in countries such as France and Finland, which have been registering worrying losses of their shares in global markets.
It is precisely for these reasons that we proposed, in our Blueprint for a deep and genuine Economic and Monetary Union, the creation of a Convergence and Competitiveness Instrument. Its objective would be to effectively push forward Member States' economic reforms for rebalancing and competitiveness. The CCI would combine a binding commitment by a Member State to a particular reform with European financial support to its implementation.
2. We must ensure that the debate on Europe's future addresses the competitiveness of our industry, and does not focus on institutional issues alone. One of the most crucial developments, from an economic point of view but also from a political and strategic angle, would definitely be a deep free trade agreement with the United States. We have a common interest to boost our ties, based on shared principles and values.
3. We need to set the wheels of the European economy in motion again, by boosting productive investment, both public and private.
4. We must continue pursuing growth-friendly fiscal consolidation.
5. We must build a deep and genuine EMU. The Commission’s “Blueprint towards a deeper and genuine Economic and Monetary Union” provides a sequenced plan for completing the construction. For the short term (six to 18 months), we foresee several concrete proposals within the current Treaties, starting with the banking union. The agreement on the Single Supervisory Mechanism reached in December was an important step. But we must limit taxpayers' exposure to the banking system. Thus developing a European Resolution Mechanism is a key priority for this year. A resolution fund should build on contributions from the sector.
In the medium term (18 months to five years), we could envisage further integration involving Treaty changes. Any steps towards more solidarity and mutualisation of risk would have to be combined with increased responsibility and further sharing of budgetary sovereignty. That implies deeper integration of decision-making, as well as commensurate steps towards a political union and increased democratic accountability.
But a deal on the so-called “Two-Pack” remains a necessary condition for any real progress. This is a test of Europe's credibility on our road towards a stability union of both responsibility and solidarity.