EMU: van Rompuy's Roadmap
Thursday 06 December 2012
By Brussels correspondent
President van Rompuy put forward a 15-page report to be discussed at the EU Summit on December 13-14; the road map proposes the to grant the European Central Bank (ECB) the responsibility to supervise the EU banks from 2014.The report lays down the actions required to ensure the stability and integrity of the European Monetary Union and calls for urgency to act to face the magnitude of the internal and external challenges of the Eurozone. The euro area needs stronger mechanisms to benefit from the EMU.
This is essential to stabilise economies and banking systems, to protect citizens from the effects of ‘unsound’ economic and fiscal policies, to create growth and social welfare. The euro area is confronted with the rise of large emerging economies. A more resilient and integrated EMU would buffer euro area countries against external economic shocks, preserve the European social model and maintain Europe’s influence at the global level, - says the report.The report directly indicates at national souvenirs as the source of current calamities. ‘The current financial arrangements are based on national responsibilities’, - continues van Rompuy.
This is inconsistent with the EMU integrity and exacerbates the harmful interplay between ‘the frailties of sovereigns and the vulnerabilities of the banking sector’. The set-up of the Single Supervisory Mechanism (SSM) will be a guarantor of strict and impartial supervisory oversight, thus contributing to breaking the link between sovereigns and banks and diminishing the probability of future systemic banking crisis, - concludes the report.All other currency unions are endowed with a central fiscal capacity. In this respect, theEuropean Council in October 2012 asked to explore further mechanisms, including an appropriate fiscal capacity, for the euro area. It would support new functions which are not covered by the multiannual financial framework.The first step towards a stand-alone euro zone fiscal resource begins, however, with a new system to supervise banks and shutdown or wind-up struggling banks, involving the imposition of losses on private investors.When a single supervisory mechanism attached to the ECB is in place, it would pave the way for the euro zone's rescue fund, the European Stability Mechanism, to help troubled banks directly, rather than via their governments.The crisis has shown the need to strengthen not only the EMU's surveillance framework but also its ability to take rapid executive decisions to improve crisis management in bad times and economic policymaker in good times. Some intergovernmental arrangements have been created as a result of the shortcomings of the previous architecture but these would ultimately need to be integrated into the legal framework of the European Union. This is already foreseen under the Treaty on Stability, Coordination and Governance, and could be envisaged also for other cases. Reinforcing the capacity of the European level to take executive economic policy decisions for the EMU is essential. Finally, as the EMU evolves towards banking, fiscal and economic union, its external representation should also be unified.
The document was prepared in conjunction with European Commission president Jose Manuel Barroso, the president of the European Central Bank, Mario Draghi, and Jean-Claude Juncker, president of the Eurogroup of finance minister.