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Without such a long-term prospect, household demand will keep falling and companies will continue to be afraid or unable to invest in the periphery.
To the extent that the divergence between the core and periphery of the eurozone has become structural over the past five years, we need structural solutions to overcome it, such as a Banking Union, re-industrialisation and resolution of unsustainable debts.
Moreover, and this has been known for a long time – and directly tested in Europe already in the 1970s and early 1990s – sustainable and well-performing monetary cooperation requires solidarity between the participating countries and that this means fiscal transfers in one form or another.
Automatic stabilisers at the transnational level could be an instrument that could help our monetary union deal with future economic crises in a way that minimises output loss and social hardship. They could play an important role in preventing a short-term asymmetric shock from unleashing longer-term divergence within the monetary union – something which we have not achieved in the past five years. To put it simply, automatic fiscal stabilisers at the EMU level could make it a lot cheaper to deal with future economic crises because action would be taken quickly, based on pre-agreed parameters. This would make the monetary union more resilient to future shocks.
This is also why the Commission has clearly envisaged in our blueprint, which we adopted exactly one year ago, that an EMU fiscal capacity with a shock absorption function needs to be considered as part of the long-term design of the monetary union. Our technical work in this area will continue and the political momentum for such reforms will hopefully also become more favourable as the discussion continues.
Are you part of a lost generation? Not necessarily! But only if economic recovery picks up and we take bold measures such as the youth guarantee and redesign the Economic and Monetary Union to promote more convergence and equity… We should not forget how much we have achieved and continue building a better Europe for all.