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 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.
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.