In October 2012, EU leaders decided even closer economic ties between EU countries were needed to build on these reforms. They called for proposals on creating a banking union, fiscal union, economic union and political union. In response the Commission presented a blueprint for creating these. The initial measures proposed now by the Commission are in line with this plan.

One proposal sets out options on how to structure EU-level discussions on closer economic and monetary union. The discussions would assess the likely effects of the reforms on national economies, and allow countries to take appropriate measures in advance.

A second proposal would require EU countries to make specific reforms via a contractual arrangement among themselves. It also allows for EU financial support to help governments introduce these reforms. The money could be used for job training, for example.

Effective coordination

The two proposals would set up the process for the steps required for a ‘deeper union’. As outlined in the blueprint, these would help ensure that responses to EU-wide economic problems are coordinated and more effective.

Over the next five years, EU countries would coordinate their tax and employment policies. Eurozone countries under pressure would have access to a common budget, backed by a ‘redemption’ fund to help them reduce large public debts to sustainable levels.

After five years, the EU could take the next steps towards full banking, budgetary and economic union, followed by political union. These later steps would require modifications to EU treaties and increased democratic accountability.

As part of the plan, EU countries would also implement reforms already agreed (or in the pipeline) on better economic and budgetary governance. They also need to approve an EU budget for 2014-20 – once this is done, a separate budget should be created to help EU countries complete economic reforms.

Press release

More on closer economic governance

Blueprint for closer union