Strengthening and deepening the Economic and Monetary Union within the current Treaties: possibilities and limits | 25 proposals

By DAVID MARTINEZ GARCIA (UEF Policy and Advocacy Officer in 2015) and PAOLO VACCA (UEF Secretary General in 2015)

SUMMARY

This policy brief analyses the possibilities that the Treaty of Lisbon offers in order to deepen and strengthen the Economic and Monetary Union and improve its democratic legitimacy and effectiveness. The democratic legitimacy of the EMU could be strengthened by a significant involvement of the European Parliament in the economic policy making process, by a better division between the executive and legislative powers, and by the creation of an EMU Committee or Super-Committee within the European Parliament.

The basis of a future economic and fiscal government of the euro area could be created by concentrating key prerogatives and capabilities on these matters and by merging the positions of President of the Eurogroup and Vice President of the Commission into a de facto “EMU Finance Minister” responsible for the development and implementation of EMU economic and fiscal policy and democratically controlled and sanctioned by the European Parliament. An own budget for the Eurozone would allow the implementation of macroeconomic convergence and investment policies aimed at improving growth in the Euro area and increasing its resilience.

If the measures proposed here were implemented (and particularly if they were implemented as a package, or within a single roadmap), they could constitute a considerable improvement in the functioning of the EMU. While potentialities exist à traité constant, rallying the necessary political consensus among Member States (especially for the many measures that can only be implemented by unanimity of the Member States) represents a major challenge.

On the other hand, the limitations provided by the Treaties are also very clear. The potential degree of financial autonomy of the Union or the EMU is restricted by their lack of powers for tax collection or for issuance of sovereign debt and their limited spending powers. The inexistence of European political accountability when it comes to policies decided through the intergovernmental method is the major obstacle to democracy, effectiveness and enforceability. Sooner rather than later the Treaties would need to be revised to reach a definitive settlement in these areas and secure a sustainable future for the EMU.

RECOMMENDATIONS

• Create a fiscal capacity / budget for the EMU integrated in the EU institutional framework
• Fully involve the European Parliament in key stages of EMU governance and create an EMU Committee or Super-Committee in the EP
• Merge the positions of President of the Eurogroup and Vice-President of the Commission creating a de facto “EMU Finance Minister”
• Revise the system of own resources of the EU or create an own resource system for the EMU
• Establish instruments for a Single Economic and Fiscal Policy for the EMU