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img_publication Press Article

Quo Vadis, Europe?

Diario Expansión (Spain)

By

The main sources of uncertainty that have hung over Europe in recent times, such as Brexit or the wave of populism and anti-European parties, are starting to disappear, or at least have moderated. Moreover, the economic outlook has improved and we are seeing an acceleration of the economy.


 

The main sources of uncertainty that have hung over Europe in recent times, such as Brexit or the wave of populism and anti-European parties, are starting to disappear, or at least have moderated. Moreover, the economic outlook has improved and we are seeing an acceleration of the economy. The question is: is this enough to inspire the European citizen on the street once again?

In general, his frustration with Europe comes from the belief that the Union reacts tardily, slowly and not always as appropriately as it might. Added to this is the perception that Brussels is far removed from people’s problems. Therefore the Council decided, with the Bratislava roadmap, to focus on the priority issues for citizens: immigration, terrorism and economic and social security.

Following the heavy blow delivered by the Brexit vote to the identity of the community project, Europe is starting to digest it. The victory of pro-European parties in the Netherlands, and especially in France, seems to have restored hope for European construction. While we shall have to wait for the result of the German elections in September, there is a perception of a renewed Franco-German alliance that has yet to be fleshed out.

All this needs to be used as the starting point for a more in-depth reflection on the future of Europe. The debate has already got under way, with a series of reports by the Commission. The first one refers to the possible scenarios as to how European integration could evolve, and presents a number of options. One of the alternatives, that of a two-speed Europe, may be considered the baseline or most probable scenario.

 

The second and more recent one is a paper on the future of the euro zone. In order to achieve the complete integration of the European Economic and Monetary Union, progress needs to be made in three key areas: financial union, economic and fiscal union and political integration. To achieve this objective, an agenda of reforms has been established in two phases. 2017-2019 and 2020-2025. All in all, the plan for the euro is based on gradual progress with a sequence of proposals in the appropriate direction. It requires a balance between risk reduction and risk sharing, and the most complex issues are left to last, without excessive detail, in the hope of reaching a consensus.

 

In the field of finance there is short-term ambition, and there is an appeal to complete banking union with a single deposit guarantee scheme and a mechanism for common public contribution to the Single Resolution Fund, helping to break the sovereign-bank circle. Furthermore it would be desirable for a review of the functioning of the banking union to be carried out in order to close possible lacunae in the single legal framework and ensure equitable application of the letter and spirit of the law in the various different jurisdictions. It would be very useful to analyse the lessons learned from the recent cases of resolution and liquidation of Spanish and Italian banks. It is also recommended that the capital markets union be completed, a positive measure that is less disruptive than banking union.

 

Fiscal union is the objective that remains least well defined and longest term, for lack of consensus. The Commission proposes studying a new European instrument (the Sovereign Bond-Backed Security) to promote diversification of bank holdings of sovereign debt and as part of the transition to fiscal union. The design of the instrument will provide clues as to what type of fiscal union is being considered. In the field of economics, the aim is to favour economic convergence by improving budgetary coordination and planning and promoting structural reforms, tying them to European and stabilisation funds.

 

On the institutional framework, the Commission proposes major changes. It seeks a single external voice for the Eurogroup, the creation of a European Treasury and the appointment of an EU Minister of Finance. At the same time it proposes transforming the European Stability Mechanism into a European Monetary Fund.

 

The great question is how we wish to move forward. It is necessary and appropriate for both the authorities and society to reflect on this. Where are we advancing to, with whom and how fast? All these questions deserve to be fully debated, with the involvement of citizens, if we wish the European project to start inspiring people again.

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