Toby Vogel, European Voice
Herman Van Rompuy, the president of the European Council, has outlined a three-stage process that he says will lead to “genuine economic and monetary union”.
In a paper published today (6 December), Van Rompuy concedes that plans for the direct recapitalisation of banks through the eurozone's bail-out fund, the European Stability Mechanism, have fallen behind schedule.
A row between France and Germany has delayed a decision to grant the European Central Bank the power to oversee banks in the eurozone, a first step towards allowing the ESM to provide capital to banks directly rather than going through national governments.
At their October summit, EU leaders called for a “legislative framework” for the single banking supervisor to be in place by 1 January. Acknowledging the delay, Van Rompuy's paper says it is imperative that “preparatory work can start in earnest at the beginning of 2013” so that the banking supervisor can start its operations from 1 January 2014.
Van Rompuy's report was co-signed by José Manuel Barroso, the president of the European Commission, Jean-Claude Juncker, the president of the Eurogroup of eurozone finance ministers, and Mario Draghi, the president of the European Central Bank. EU leaders will discuss the plan at their summit in Brussels next week (13-14 December).
The report also proposes a single resolution mechanism to restructure or close down failing banks.
Germany is resisting such measures, which it sees as steps toward a ‘transfer union' in which German taxpayers will be called upon to bail out failing banks in Spain and other troubled eurozone economies.
The report recommends the creation of a centralised eurozone “fiscal capacity” from 2014 to protect national economies against financial shocks. The report suggests that the fiscal capacity could serve as an “appropriate basis for common debt issuance without resorting to the mutualisation of sovereign debt” - a nod to Germany, which opposes the use of eurobonds.
The report makes the case that these ideas should not be treated separately but as part of a “mutually reinforcing comprehensive package”. The report says that there are “strong linkages” between the “building blocks” it presents and that these “should be examined as part of a mutually reinforcing comprehensive package”.
“This report lays down the actions required to ensure the stability and integrity of the EMU and calls for a political commitment to implement the proposed roadmap,” it says. “The urgency to act stems from the magnitude of the internal and external challenges currently faced by the euro area and its individual members.”
Van Rompuy outlines plan for deeper fiscal union (1)