EU Com­mis­sion seeks ¤500bn cri­sis fund and fi­nance min­is­ter

We need to make euro ‘weath­er­fast’ for fu­ture, says bud­get com­mis­sioner Am­bi­tious agenda of re­forms aims to en­hance ‘demo­cratic ac­count­abil­ity’

The Irish Times - - Business News - PA­TRICK SMYTH in Brussels

The EU needs to seize the op­por­tu­nity of the eco­nomic up­swing to com­plete the task of build­ing eco­nomic and mon­e­tary union, the Euro­pean Com­mis­sion in­sisted yes­ter­day.

“We need to make the euro weath­er­fast for the fu­ture,” bud­get com­mis­sioner Guen­ther Oetinger told jour­nal­ists at a press con­fer­ence in Brussels.

With EU lead­ers set to debate the euro’s fu­ture at a spe­cial sum­mit next week, the com­mis­sion has set out an am­bi­tious agenda of re­forms of the cur­rency’s in­sti­tu­tional ar­chi­tec­ture and new fi­nan­cial in­stru­ments.

Its pur­pose, com­mis­sioner for eco­nomic af­fairs Pierre Moscovici said, was to en­hance “the unity, ef­fi­ciency and demo­cratic ac­count­abil­ity” of the cur­rency.

Most am­bi­tiously the com­mis­sion pro­poses turn­ing the EU’s sov­er­eign bailout fund, the Euro­pean sta­bil­ity mech­a­nism, cre­ated dur­ing the fi­nan­cial cri­sis to as­sist in bailouts in Greece and Ire­land among oth­ers, into a Euro­pean mon­e­tary fund (EMF) with wider pow­ers. It would be a “ro­bust cri­sis man­age­ment body”, the com­mis­sion said, with an over­all lend­ing ca­pac­ity of ¤500 bil­lion.

Shocks

Its ex­panded role as­sist­ing mem­ber states in fi­nan­cial dif­fi­culty, no­tably pro­tect­ing in­vest­ment pro­grammes dur­ing down­turns, would also see it pro­vid­ing a fi­nan­cial back­stop for the sin­gle res­o­lu­tion fund and act­ing as a lender of last re­sort to fa­cil­i­tate the orderly res­o­lu­tion of dis­tressed banks.

Over time, the EMF could de­velop the ca­pac­ity to act as a sta­bil­i­sa­tion fund for the euro area to cush­ion in­di­vid­ual states or groups of states against asym­met­ric shocks.

The com­mis­sion was coy about the scale of such a fund but, mind­ful of Ger­man con­cerns, in­sisted that it would not be in­volved in “permanent fis­cal trans­fers be­tween mem­ber states”.

The bud­get would have to be ne­go­ti­ated in the con­text of the 2020 bud­get dis­cus­sions, Mr Oetinger said, not­ing that the cur­rent EU bud­get ceil­ing of 1 per cent of EU GDP “isn’t go­ing to work any­more”.

Mem­ber states had to un­der­stand, he said, that it would be far cheaper to in­crease the bud­get ahead of the next cri­sis than face it un­pre­pared.

Among other mea­sures pro­posed by the com­mis­sion was the ap­point­ment of an EU fi­nance min­is­ter who would serve as a bridge be­tween the in­for­mal eurogroup of mem­ber states, which they would chair, and the com­mis­sion on which they would also serve.

Un­like tra­di­tional fi­nance min­is­ters, the new role would not in­volve con­trol­ling a bud­get but be re­spon­si­ble for steer­ing the bud­getary co-or­di­na­tion and surveil­lance sys­tem be­tween mem­ber states un­der the EU’s “se­mes­ter” sys­tem.

The new min­is­ter would be ac­count­able to the Euro­pean Par­lia­ment in a way that the cur­rent chair of the eurogroup is not.

The com­mis­sion has re­jected the ideas of a sep­a­rate bud­get or par­lia­ment for the euro’s 19 mem­bers, pre­fer­ring to in­cor­po­rate the man­age­ment of the cur­rency’s af­fairs into “com­mu­nity” in­sti­tu­tions.

How­ever, the com­mis­sion’s level of am­bi­tion means that its pro­pos­als are un­likely to go through smoothly.

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