By Alastair Macdonald
As Greece threatens new shocks for the eurozone, EU chief executive Jean-Claude Juncker laid out a vision on Monday for tighter joint control over the currency zone’s economies, including, one day, a potential common eurozone treasury.
In a report issued in cooperation with the European Central Bank and other EU bodies, the European Commission president proposed more help for states in distress, combined with tougher discipline for countries that miss fiscal targets.
The timing of the report in a week of crisis for the 19-nation currency area was coincidental, but it highlights the difficulty of managing a monetary union among countries with separate tax and spending powers and political priorities.
It recommended “quick fix” steps that could be introduced in the next two years, such as setting up a common bank deposit insurance system and promoting competitiveness, as well as longer term ideas, such as a common eurozone treasury.
Despite the crises of the past years, as governments unable to devalue national currencies have struggled to manage their finances amid global recession, the report began with the phrase: “The euro is a successful and stable currency.”
However, high unemployment showed that change was needed to ensure the currency had a “lasting, fair and democratically legitimate basis”. The need for economies and budgets to converge would “inevitably involve sharing more sovereignty over time”.
National leaders, who commissioned the report last year, will have a first chance to discuss it at a summit on Thursday and Friday, likely to be dominated by efforts to prevent Greece defaulting on debt and potentially losing access to the euro.
There is plenty in the report for leaders to disagree on. Calls for tougher discipline on countries that fail to meet budget criteria will please traditionally frugal Germany, but could embarrass France which has sought more indulgent treatment under existing rules.
The report also says states running persistent trade surpluses should adjust. That seems aimed mainly at Germany, which annoys some neighbours by consuming less than it makes.
And its call for shared fiscal resources to help countries in difficulty are an issue on which German Chancellor Angela Merkel has been wary but which some countries say is vital to make the common currency viable.
Few details were given about the proposal for a possible “euro area treasury”. The report stressed that cash transfers intended to stabilise countries in difficulty would not go permanently to the same states, nor would they be used to equalise incomes among rich and poor countries.
A Commission spokeswoman stressed there was no intention to centralise all member state tax and spending decisions.
In the short term, the report recommends setting up national competitiveness authorities to press governments to pursue policies to help productivity. It called for a greater stress on promoting employment and sustainable pension systems as part of a more “forceful” use of annual EU reviews of national budgets.
A European Deposit Insurance Scheme would reduce the risk of banking crises by sharing risks among EU states.
European Council President Donald Tusk, who chairs this week’s summit, stressed the need for rapid action, without waiting for the long and difficult process of changing treaties.
“A lot can and should be done in the short term within the current treaty framework,” he said. “This message is even more important in the middle of the crisis with Greece.”
In a nod to Britain, the main EU economy set on keeping its own currency, the preamble to the report underlined that euro zone integration should not harm the wider single market.
Prime Minister David Cameron has made guarantees of Britain’s access to the EU single market without euro membership a condition for him to call on voters to remain in the bloc at a referendum he will call by the end of 2017.
British officials have said they support tighter integration of the eurozone and would like new terms for London included in changes to treaties on the subject. Juncker’s timeline makes clear that any treaty change is not on his agenda until after 2017.