|
|
Three things need to be done urgently if people and markets are to regain confidence in Europe.
The first is to tackle the immediate crisis. Greece’s government must without further delay adopt and implement the necessary reforms. Just as urgently, states and banks need protection from contagion. This includes implementing the decisions of the European Council on private sector involvement, recapitalising banks and increasing the “firepower” of the European Financial Stability Facility.
Second, we need a clear-cut strategy for competitiveness and growth. It is equally crucial to put much greater emphasis on innovation, education and research in EU budgets. Economic and financial policies must be co-ordinated more closely.
Third, we need to provide for the future and upgrade the monetary union to a stability union. Sound budgeting is not a German idée fixe based on our historical experience of hyperinflation. It is in the interest of Europe as a whole. If we want to turn things around irreversibly, we will not be able to avoid amending the treaties.
It is vital to send a clear message to markets that the eurozone is determined to end the policies of debt-making. At the European Council in December, we should agree on establishing a convention for a limited treaty change. Its mission would be to strengthen the economic and currency union, no more, but no less. The process leading to sanctions should in the future be triggered automatically. There need to be binding rights at the European level regarding the budgets of eurozone states which continuously deviate from the fiscal straight and narrow.
To overcome its weaknesses the eurozone needs deeper integration through tighter economic governance and tougher rules for the stability pact. The challenge is to manage this without creating a split within the EU. Does that mean squaring the circle? No. There are ways to ensure coherence of the union as a whole. Changing the EU treaty at 27 – however tiresome and difficult that may seem – is the best way to prevent a disconnect between the eurozone and remaining EU Member States. Greater transparency and closer ties between the euro-17 and the other EU states would also help cohesion, as would further measures to strengthen the single market. A separate treaty limited to the eurozone can only be a last resort.
Full article (FT subscription required)