European Commission President Jean-Claude Juncker wants the euro area to move toward creating a common treasury by 2025, according to a report endorsed by European Central Bank (ECB) President Mario Draghi and other senior officials.
National governments would keep control over specific tax and spending decisions under Juncker's vision for the future of economic and monetary union. At the same time, "some decisions will increasingly need to be made collectively" and a common treasury may be needed, said the so-called "five presidents" report, released on Monday in Brussels.
"We need to address the fragilities of our economies; to ensure that divergence will become convergence again; and to safeguard the irreversibility of monetary union," Draghi said in a statement. He called for a "quantum leap" in European integration leading to "joint decision-making within common institutions" instead of coordination by rules.
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In the short term, Juncker wants to create an expert panel to help the European Commission prepare a next-steps report by 2017. He also calls on the euro zone to focus on "deepening by doing," acknowledging that 2011 budget-rule changes have "largely failed to deliver the expected results."
The report doesn't mention Greece's battle to stay in the euro, a crisis that has forced euro-area leaders to hold emergency talks Monday ahead of a full European Union summit later in the week. Instead, Juncker calls on the euro area generally to renew its commitment to a joint future.
"All members of our monetary union have given up their previous national currencies once and for all, and permanently share monetary sovereignty with the other euro-area countries," Juncker's report said. "This common destiny requires solidarity in times of crisis and respect for commonly agreed rules from all members."
The 19-nation euro area has been under siege during more than five years of sovereign debt and financial crisis. Juncker's report, long scheduled for release this month, comes as the bloc tries to prove that the crisis is history even though Greece's struggles continue.
"The very fact that we have that kind of a crisis underlines the need for this report and to address some of the elements which are still incomplete," European Commission Vice President Valdis Dombrovskis told reporters on Friday in Luxembourg.
Banking Union
Euro-area nations need to strengthen the banking-union project that grew out of 2012 pledges to safeguard the common currency, the report says. It calls for "swift agreement" on bridge financing for the Single Resolution Fund, so it will be fully functional by its Jan. 1, 2016, start date even before there are enough contributions to bring it to full strength.
Setting up full-fledged EU deposit insurance "will take time, but taking concrete steps in that direction should be a priority" between now and 2017, to the extent allowed under the EU's current legal framework, the report said. Looking ahead, the EU may want to consider creating a "re-insurance scheme" for national deposit guarantee schemes.
In the longer term, the banking union will need "a credible common backstop," perhaps through a credit line from the European Stability Mechanism firewall fund, the report says. It also calls for a European Union-wide deposit insurance system, and for countries to adopt a standard definition of bank capital and reduce national discretion.
On the economic front, the report wants a "shock absorption mechanism" to help countries weather economic ups and downs when euro area nations grow at different paces. This mechanism, to be fleshed out by the expert group between now and 2017, can't be a permanent transfer mechanism or "an instrument for crisis management," the report says.
Countries need fewer and more durable requirements from the euro area's economic monitoring system, said Jeroen Dijsselbloem, Dutch Finance Minister and president of the euro-area finance ministers' group.
"We are resolute in our determination to strengthening the monetary union," Dijsselbloem said. Juncker wrote the euro report "in close cooperation" with Draghi, Dijsselbloem, EU President Donald Tusk, and European Parliament President Martin Schulz.
Dijsselbloem's job as Eurogroup chief could change as a result of the report's recommendations, which call for "a reinforcement" of the group's presidency "and the means at its disposal." After 2017, the euro area's longer-term future may mean creating a permanent Eurogroup leader that could play a bigger role in global diplomacy, the report says.
New Forms
The report calls on the euro area to complete its economic and monetary union "at the latest by 2025." It wants countries to commit to further centrally driven reforms if they want access to new forms of euro-area economic support, and it wants all euro nations to set up up "competition authorities" to monitor conditions and play a role in wage negotiations.
As the five presidents' report entered the final stages of preparation, some European officials acknowledged the difficulty of tackling the currency union's future while faced with the immediate challenges of keeping all current members on board.
The euro's future "is something that we'll only be able to debate once we have clarity on a number of other issues," European Commission Vice President Frans Timmermans said last week in a Brussels speech.
–With assistance from Corina Ruhe in Amsterdam, Alessandro Speciale in Frankfurt, and Jim Brunsden in Brussels.
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