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After reviewing the situation in the euro area, this paper will analyse the proposed reform of the EMU by the Commission and also by Governments. Some insights are given into the future of the economic and financial landscape, which would be reshaped by the second phase of the Commission’s programme.
The adoption of measures in the 1st phase of this plan by Europe’s leaders as of 2019 would undoubtedly trigger a positive knock-on effect to settle the vital problem experienced by the euro area. This lies in the leadership’s weak ability – despite a wide range of tools to hand, to take vital decisions, notably to achieve harmonious growth between Member States. Only this can guarantee the single currency’s sustainability.
The euro area faces two challenges. On the one hand, leaders must respond to a central question: they have to achieve, via its economic governance, the convergence of its economies (which are disturbingly divergent) towards growth. On the other, the euro area also has to be strengthened in terms of its resilience and its internal cohesion, via credible support and solidarity mechanisms.
After a great deal of reform between 2010 and 2013, many initiatives and proposals were put forward to deepen Economic and Monetary Union (EMU), which regulates the euro area. But after the decisive progress made by Banking Union in 2013, we have witnessed a relative stagnation of the transformation process.
Divisions are emerging between the leaders, if it is not over the path to follow, it is over the order of the stages. Some have difficulties with the idea of accountability, whilst others object to solidarity. Slowly, a framework, including the two ideas, is now being created.
In view of 28th and 29th June 2018, when the leaders must take decisions to reform the EMU, the Commission has delivered some proposals.
To assess these measures, we shall firstly look into the euro area’s economic and political situation, which reflects extremely contrasted images, depending on the country. Then, the draft EMU reforms, which come in two phases, will be assessed. Whilst the second stage is still only of an exploratory nature, the first, which would provide new impetus to the euro area, could be implemented rapidly. [...]