Commission Reflections on Deepening EMU:

11 July 2017

Could “Eurobills” be a Modest, First Step?

Summary and Conclusion

• The electoral calendar of EU27: a rare period of stability seems to lie ahead.  After the French Presidential and Parliamentary elections, EU27’s politicians have reason to feel that anti-EU populist surge has passed its peak.  The recent Italian municipal elections suggest that the more traditional political groups have regained traction and opinion polls suggest a strong likelihood of a fourth term for Chancellor Merkel.
• The economy is now in its fourth year of expansion, employment is at an all-time high, unemployment is declining, public finances have improved and banking union seems to be delivering on its promises of winding down failing banks without contagion.
• Visionary ideas have re-appeared from the shadows. The policy prescriptions of the 2015 Five Presidents Report are now being discussed with a view to implementation during its `Stage 2’ – by 2025.  A grand bargain of major economic reform in France – if carried through – may now be met with some relaxation of German opposition to deeper financial integration in the Eurozone.
• Accordingly, the European Commission’s Reflection Paper on deepening the EMU laid out a roadmap of possible actions for further analysis.  This should now include consideration of a Temporary Eurobill Fund

Graham Bishop’s Plan for a Temporary Eurobill Fund (TEF) could be a modest, first step along this road by building trust amongst states and with citizens:

• Participating states would borrow from the Fund – at their own risk – for up to two years.
• The legal format would follow the tried and tested template of the ESM but would NOT require a change to the TFEU.
• The costs would be minimal and the TEF could be functioning before the 2019 EP elections.

The TEF would:

• Provide important benefits for consumers by providing a cheap, safe, savings vehicle.
• Be an institution binding the euro area further into economic policy co-ordination and convergence – thereby encouraging fiscal stabilisation; deepen the financial integration inherent in CMU; and buttress financial stability of both banks and governments.
• Be initiated as a modest stepping-stone; be scaled up during Stage 2 towards becoming a de facto European Treasury with Communautaire political governance – perhaps even providing a modest short-term `fiscal capacity’.
• If successful, the maturity range could be extended beyond two years.
• If unsuccessful, be easily reversed (even to extinction) within two years.

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© Graham Bishop