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Single Market and EMU

Event Report: What kind of Monetary Union does Europe need?

The Five Presidents’ report on the Economic and Monetary Union will be high on the agenda of the upcoming European Council held on 17-18 December in Brussels.

Ahead of the EU leaders’ December gathering, the European Movement International organised a stakeholders’ debate on 12 November 2015 to discuss ‘What kind of Monetary Union does Europe need’ held just days after the inter-parliamentary Conference on Stability, Economic Coordination and Governance in the European Union and the most recent developments in the field.

Speakers from the European Parliament, European Commission and Council, as well as three leading think-tanks, offered their distinct perspective on the Five Presidents’ report. MEP Pervenche Berès (S&D), the European Parliament Rapporteur on EMU economic governance, argued that the crucial differences between the EP report she acted as a Rapporteur for and proposals put forward by the five Presidents lie in the level of investment needed, the nature of structural reform pursued, as well as on the debt issue, something which is omitted in the Five Presidents’ report.

José Leandro, Director at DG ECFIN and Principal Adviser on EMU to the President of the European Commission, put forward the main economic rationale behind the proposals in the Five Presidents’ Report on Completing Europe’s EMU. “In a monetary union where large scale fiscal transfers are absent and labour mobility is relatively low, Member States need to put in place policies that ensure fiscal stability, prevent the emergence of large macroeconomic imbalances and facilitate adjustment in case of idiosyncratic shocks”, he stated.

João Nogueira Martins, Economic Advisor at the Cabinet of Donald Tusk, started by saying that we cannot expect quick fixes from the December European Council, but rather a steady – yet slow – movement. He argued that the EMU is not ready for the next crisis but what has already been achieved (and what is still in the pipeline) in the banking union will help overcome fiscal turbulence.

Cypriot MEP Costas Mavrides advocated for a stronger role of the European Parliament, “I think that more power – meaning more democratic legitimisation – should be shifted from other powerful institutions towards the European Parliament”, he said. He suggested drawing lessons from the past, focusing on the case of Cyprus as a “guinea pig of the EMU experiment”.

André Sapir, Senior Fellow at Bruegel sketched a pretty pessimistic economic picture, taking into consideration not only the European debt problem, but also the prevailing populist discourse. In this landscape he views the Five Presidents’ report as a good framework to start from, but one which still needs momentum and political consensus.

The European Policy Centre’s Chief Executive and Chief Economist Fabian Zuleeg pointed out that the European Union is facing an existential crisis these days. “It is difficult to outline one particular reform urgently needed as there are many levels on which the EMU is lacking, but the crucial thing missing is trust between the Member States” he argued. “Thus, a way needs to be found to re-establish trust. Small steps to rebuild trust – trust is the fundamental issue in the EMU and its lack can become a serious existential threat”, he concluded.

Christian Odendahl, Chief Economist at the Centre for European Reform, argued that Economic policy at the European level needs integration at the European level as well as national discipline, while people understand policy-making via the national democratic process. One of the strongest lessons learnt from the financial crisis is that “the financial system in particular needs to be truly and fully European”. He doubted whether we will see some fundamental changes over the next year, as we still do not have enough intellectual convergence on what is needed.

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