Financial intergration proposals for Europe – along with barriers that stand in the way

When France elected Emmanuel Macron in May, the prospects of mending the euro’s inherent flaws suddenly brightened. Adopted in 1999, the common European currency was intended as a project to foster unity, but the crisis in Greece a decade later exposed the euro’s inability to enforce shared rules, principally on government debt and spending.

The French president is pushing for greater fiscal integration among the 19 nations that now use the euro as a way to address at least some of those shortcomings. With Germany indicating an openness to Mr Macron’s calls, the political stars may be aligning to overhaul the euro, and so reboot the European Union.

Here are some of the proposals on the table, and the hurdles to their adoption:

A common budget

Mr Macron has proposed the creation of a euro-area budget, aiming to help fund investments to boost growth, provide emergency financial assistance and streamline the bloc’s response to economic crises. While nations would still have discretion over their own budgets, this common pool of resources could be a boon during periods of financial turmoil and would reduce reliance on the European Central Bank to stimulate the euro-zone economy. Access to this budget would be contingent on states sticking to the bloc’s rules.

German chancellor Angela Merkel has said she is open to the idea. “I’m very glad that this idea is being introduced again,” she said.

A single finance minister

Mr Macron has also proposed creating the role of a finance chief for the euro area, an idea long supported by German finance minister Wolfgang Schaeuble. This person would be responsible for a budget and could operate under the supervision of the European Parliament. Mr Schaeuble has said that such a change would require adjusting EU treaties, which is not realistic at present.

Which countries support the plans?

The common budget and finance minister proposals have the backing of countries such as Spain and Italy, which have said such steps are important to strengthen the bloc.

Progress to date

The euro has had a tricky decade. Since the onset of the European debt crisis, five of the bloc’s members had to be bailed out and Greece nearly left the euro in 2015 amid financial mismanagement, political brinkmanship and a ballooning deficit. But since the peak of the turmoil, many of the key structural weaknesses have been addressed, mainly through the creation of a set of new structures and regulations that centralised the supervision and resolution framework for the bloc’s biggest lenders.

Debt sharing

Perhaps the most controversial proposal is the issuance of debt that would be guaranteed by the euro states. In an effort to quell objections, the commission floated the creation of so-called European Safe Assets, a financial instrument that would bundle sovereign debt from across the currency bloc so it can be sold to investors as one product.

A European Monetary Fund

One idea supported by large euro-area members is to turn the Luxembourg-based European Stability Mechanism into a European Monetary Fund by giving it greater power on fiscal monitoring and more say over future rescue programmes. This would allow the fund to monitor the finances of countries that are in trouble and oversee future bailouts. Giving the ESM a broader remit would also hand more powers to the fund’s board of governors – euro-area finance ministers themselves.