Europe’s Economic and Monetary Union (EMU) was launched in an incomplete form. While monetary policy was centralised on the European Central Bank, fiscal sovereignty was retained at the national level – a lop-sided EMU that was expected soon to be overhauled. The time has come, therefore, to deepen fiscal integration and prepare the way forward to political union without which, ultimately, no monetary union can prosper. In the financial crash of 2008 the fact that there was no credible government of the political economy of the euro area provoked heightened uncertainty and risk, driving up the financial and social cost of re-stabilising the eurozone. To continue in denial and not to tackle the reform of euro governance will exacerbate the economic downturn when the next financial shock occurs (which it surely will). 

The emergency measures taken to deal with the euro crisis, including the fiscal compact treaty, are also due for review. Some proposals which were dismissed in the middle of the crisis, often peremptorily, should be revived – not least the idea of creating a mutualised safe asset for EMU. By sharing financial risk and incentivising sound economic and fiscal policies, a large eurobond market would lower borrowing costs across the euro area. European sovereign bonds would offer investors an attractive alternative to national sovereign bonds, offering a way out of the doom loop between shaky national banks and poorly governed states. 

The current treaty obliges member states to treat their national economic policies “as a matter of common concern”[79].  But the mere - inevitably loose and haphazard   coordination of national policy is insufficiently binding for states which have committed or are about to commit to a single currency. The current weak governance of the euro area has allowed dangerous structural imbalances between the richer and poorer regions to deepen further. Not all EU citizens share in the fruits of the single market and monetary union: new fiscal instruments as well as a policy shift are needed to ensure this happens. We recommend, therefore, that the new treaty promotes the objective of a common economic and fiscal policy, alongside that of the single monetary policy, aimed at promoting employment, investment, social cohesion and sustainable development throughout the Union. The aim is not a quick-fix harmonisation of living standards in the eurozone through a massive programme of income redistribution. It is to ensure the future stability of the euro and its better resilience to crisis, thereby creating the basis for a sustainable increase in prosperity and well-being across the euro area as a whole. 

The procedure for establishing broad economic policy guidelines at the EU level puts the onus on the European Council and Council to act on recommendations and reports of the Commission, with the Parliament being merely informed. It would be more efficient and democratic to give the lead to the Commission to make proposals to the Council and Parliament, which, under co-decision, would then endorse them. 

As things stand, the European Central Bank (ECB) is prohibited from the monetary financing of national governments in the primary markets [80].  And the Union is prevented from assuming liability for the sovereign debt of member states [81].  Nevertheless, in the aftermath of the crash the EU is faced with the inevitability of creating a sound mechanism for debt restructuring. There remains strong opposition, especially in Germany, to a reform of EMU that would enable the systematic, progressive pooling of a share of national debt. The Spinelli Group believes, however, that the treaty provisions of EMU are too prohibitive for the long term. As mentioned above, we propose to endow the Commission with consolidated fiscal instruments and all the functions of a treasury, including the running of a cyclical unemployment insurance scheme, the issuance of eurobonds and the levying of taxes. Participation in the common system of debt management will be based on prudential considerations and subject to strict conditionality.

The Spinelli Group urges the rapid completion of all aspects of the banking union, including a system of deposit guarantee insurance. The Union’s new financial regulatory framework involving surveillance, supervision and resolution needs to be entrenched in terms of primary law. The powers of supervisory oversight held by the ECB should be extended to all credit institutions, including the insurance industry [82].  This should be enacted by the ordinary legislative procedure. In another adjustment, profits made by the ECB should be channelled to the EU Treasury [83].  

A shift of responsibility from the Council to the Commission should take place with regard to the excessive deficit procedure. The ‘Six-Pack’ legislation, launched in 2010, reinforced both the preventive and corrective arms of the Stability and Growth Pact. For years, the Council had been acting by QMV to water down the Commission’s recommendations under the Pact to individual states. As part of the Six Pack, Parliament insisted on a new voting mechanism whereby a Commission recommendation is deemed adopted by the Council unless a qualified majority of states is assembled to block it. This method of ‘reverse QMV’ has greatly strengthened the power and responsibility of the Commission, and needs now to be codified in terms of primary law [84].

The national parliament of a state under an excessive deficit procedure should be given a statutory right to have a hearing in the European Parliament, with the participation of the Commission and Council. And as we have noted above, amending the protocol on the excessive deficit procedure should be subject to an organic law [85];

[79] Article 121 
[80] Article 123 
[81] Article 125 
[82] Article 127(6) 
[83] Article 33(1) of the Statute of the 
[84] Article 126(13) 
[85] Article 126(14) TFEU.


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