UPN, Alm.del - 2012-13 - Bilag 65: ØMU-Rapport - "Towards a genuine EMU" vedrørende møde i Det Europæiske Råds den 13.-14. december 2012

identified in the report “Towards agenuine Economic and MonetaryUnion” presented at the JuneEuropean Council. It incorporatesvaluable input provided by theCommission in its communication"A Blueprint for a deep andgenuine EMU – Launching aEuropean Debate" of 28 November2012. The European Parliamenthas also made a valuable

Member States as they face specificchallenges by virtue of sharing acurrency. The process towards adeeper EMU should becharacterised by openness andtransparency and be fullycompatible with the Single Marketin all aspects.

political commitment to implementthe proposed roadmap. The urgencyto act stems from the magnitude ofthe internal and external challengescurrently faced by the euro area andits individual members.

ensure trust in the effectiveness ofEuropean and national policies, tofulfil vital public functions, such asstabilisation of economies andbanking systems, to protect citizensfrom the effects of unsoundeconomic and fiscal policies, and toensure high level of growth andsocial welfare.

A more resilient and integratedEMU would buffer euro areacountries against external economicshocks, preserve the Europeanmodel of social cohesion andmaintain Europe’s influence at theglobal level.

a roadmap towards a genuineEMU. They underscore that ‘MoreEurope’ is not an end in itself, butrather a means for serving thecitizens of Europe and increasingtheir prosperity.

mutually reinforcingcomprehensive package. Thecreation of an integrated financialframework has important fiscal andeconomic implications andtherefore cannot be envisagedseparately. Similarly, the proposalsput forward in the fiscal andeconomic policy sphere are closelyintertwined. And, as all theproposals imply deeper integration,

The process could rest on thefollowing three stages (see alsodiagram in annex):

Ensuring fiscal sustainability andbreaking the link between banksand sovereigns

of public finances and break thelink between banks and sovereigns,which has been one of the rootcauses of the sovereign debt crisis.This stage would include fiveessential elements:

implementation of a strongerframework for fiscal governance('Six-Pack'; Treaty on Stability,Coordination and Governance;'Two-Pack').

systematicex ante coordination ofmajor economic policy reforms, asenvisaged in Article 11 of theTreaty on Stability Convergenceand Governance (TSCG).

Single Supervisory Mechanism(SSM) for the banking sector andthe entry into force of the CapitalRequirements Regulation andDirective (CRR/CRDIV).

national resolution and depositguarantee frameworks, ensuringappropriate funding from thefinancial industry.

framework for direct bankrecapitalisation through theEuropean Stability Mechanism(ESM).

Completing the integratedfinancial framework andpromoting sound structuralpolicies

setting up of a common resolutionauthority and an appropriatebackstop to ensure that bankresolution decisions are takenswiftly, impartially and in the bestinterest of all.

on the policies countries commit toundertake and on theirimplementation. On a case-by-casebasis, they could be supported withtemporary, targeted and flexiblefinancial support. As this financialsupport would be temporary innature, it should be treatedseparately from the multiannualfinancial framework.

Improving the resilience of EMUthrough the creation of a shock-absorption function at the centrallevel

This stage would mark theculmination of the process. Stage 3would consist in:

incentives-based system wouldencourage euro area Member Stateseligible for participation in theshock absorption function tocontinue to pursue sound fiscal andstructural policies in accordancewith their contractual obligations.Thereby the two objectives ofasymmetric shock absorption andthe promotion of sound economicpolicies would remain intrinsically

and employment, building on theMember States' National Job Plans.More generally, as the EMUevolves towards deeper integration,a number of other important issueswill need to be further examined. Inthis respect, this report and theCommission's "Blueprint" offer abasis for debate.

between the fragilities ofsovereigns and the vulnerabilitiesof the banking sector. The set-up ofthe Single Supervisory Mechanism(SSM) will be a guarantor of strictand impartial supervisoryoversight, thus contributing tobreaking the link betweensovereigns and banks anddiminishing the probability offuture systemic banking crisis.

2013. It called for the rapidconclusion of the single rule book,including agreement on theproposals on bank capitalrequirements by the end of the year.It also called for the rapid adoptionof the provisions relating to theharmonisation of nationalresolution and deposit guaranteeframeworks.

responsibility for bankingsupervision is coupled withadequate control powers. In thisregard, establishing an appropriateframework for macro-prudentialpolicy that takes due account ofboth national and Europe-widedimension will be important. TheECB has confirmed that it willestablish organisationalarrangements guaranteeing a clear

directly. The legal and operationalframework for ESM direct bankrecapitalisation should be finalisedby end-March 2013. In order tomove towards an integratedfinancial framework, the SSM willneed to be complemented by asingle resolution mechanism, aswell as more harmonised depositguarantee mechanisms.

resolution framework wouldcontribute to limiting the cost ofbank failures to taxpayers. Thecurrent legislative proposal onrecovery and resolution will ensurethat harmonised tools necessary fororderly bank resolutions areavailable in all EU Member States,including early interventions,bailing-in and the creation ofbridge banks.

Scheme Directive have beenadopted. This single resolutionmechanism – built around a singleresolution authority – should beestablished as the ECB assumes itssupervisory responsibility in full.This mechanism covering all bankssupervised by the SSM should bebased on robust governancearrangements, including adequateprovisions on independence and

Establishing a single resolutionmechanism is indispensable tocomplete an integrated financialframework:

many of the current obstacles toresolution, such as national biasand cross-border cooperationfrictions. This would reduceresolution costs, as early andprompt actions contribute tomaintaining the economic value ofbanks that need to be resolved.

legal and administrative capabilityas well as the necessaryindependence to carry out effectiveand least-cost resolution. Byensuring that the private sectorbears the primary burden of bankresolution costs, the authoritywould increase market discipline,and minimise the residual costs forthe taxpayers of bank failures.

are restructured or closed downswiftly. The SSM would provide atimely and unbiased assessment ofthe need for resolution, while thesingle resolution authority wouldensure actual timely and efficientresolution.

resolution regime. It would befunded throughex ante risk-basedlevies on all the banks directlyparticipating in the SSM. Thesingle resolution mechanism shouldinclude an appropriate andeffective common backstop. Thiscould possibly be organized bymeans of an ESM credit line to thesingle resolution authority. Thisbackstop should be fiscally-neutral

provisions to ensure thatsufficiently robust national depositinsurance systems are set up ineach Member State, therebylimiting the spill-over effectsassociated with deposit flightbetween institutions and acrosscountries, and ensuring anappropriate degree of depositorprotection in the European Union.A rapid adoption of this proposal is

This would contribute tosustainable growth andmacroeconomic stability. TheOctober Interim Report stressed theneed for stronger economicgovernance and suggested, as anadditional step, the possibility todevelop gradually a fiscal capacityfor the EMU, which could facilitateadjustment to economic shocks.Following the conclusions of the

imbalances, on debt developments,on better enforcement mechanisms,and on national ownership of EUrules. The other elements related tostrengthening fiscal governance inthe euro area ('Two-Pack'), whichare still in the legislative process,should be finalised urgently and beimplemented thoroughly. This newgovernance framework will providefor ampleex ante coordination of

against adverse shocks differ, allother currency unions are endowedwith a central fiscal capacity. Inthis respect, the European Councilin October 2012 asked to explorefurther mechanisms, including anappropriate fiscal capacity, for theeuro area. It would support newfunctions which are not covered bythe multiannual financialframework from which it is clearly

arrangements would be mandatoryfor euro area Member States andvoluntary for the others (see sectionIII below). The Commissionintends to make a proposal onspecific ways to put in place suchcontractual arrangements and onthe means to support theirimplementation, building on EUprocedures.

country-specific economic shocks.Such a function would ensure aform of fiscal solidarity exercisedover economic cycles, improvingthe resilience of the euro area as awhole and reducing the financialand output costs associated withmacroeconomic adjustments. Bycontributing to macroeconomicstability, it would usefullycomplement the crisis management

policies of the Member States, thetwo objectives of supportinggrowth-enhancing structuralreforms and cushioning country-specific economic shocks arecomplementary and mutuallyreinforcing.

shocks are less than perfect. This isclearly the case in the euro area,where labour mobility iscomparatively low, capital flowsare susceptible to sudden swingsthat can undermine financialstability, and structural rigiditiescan delay or impede priceadjustments and the reallocation ofresources. In such cases, countriescan easily find themselves pushed

would provide countries with anadditional strong incentive toimplement sound economicpolicies both before and once theyjoin the shock absorptionmechanism. In the transitiontowards establishing this automaticstabilisation function, anddepending on their specificcircumstances, limited, temporaryand flexible financial incentives

form of an insurance-type systembetween euro area countries.Contributions from, anddisbursements to, national budgetswould fluctuate according to eachcountry's position over theeconomic cycle.

public function sensitive to theeconomic cycle, such asunemployment insurance. In thiscase, the level ofcontributions/benefits from/to thefiscal capacity would dependdirectly on labour marketdevelopments. In this scenario, thefiscal capacity would then work asa complement or partial substituteto national unemployment

followed, establishing this functiondoes not affect the overall level ofpublic expenditure and tax pressurein the euro area. Equally, the exactconditions and thresholds for theactivation of transfers would needto be studied carefully, as onlycountry-specific shocks of asufficient magnitude should beabsorbed centrally. For example, inthe case of the microeconomic

area fiscal capacity could indeedoffer an appropriate basis forcommon debt issuance withoutresorting to the mutualisation ofsovereign debt. The question ofapplying a fiscal golden rule, suchas the balanced budget ruleenshrined in both the Stability andGrowth Pact and the Treaty onStability, Coordination andGovernance, to this fiscal capacity

economies have negativerepercussions for all members ofthe EMU. An integrated economicpolicy framework is necessary toguide at all times the policies ofMember States towards strong andsustainable economic growth toproduce higher levels of growthand employment.

and to facilitate price and costadjustments that are key forcompetitiveness and growth.Urgent attention should be paid topromoting labour mobility acrossborders and addressing skillsmismatch in the labour market. TheCommission could undertake thisassessment as a matter of priority.Finally, a framework for systematicex-ante coordination of major

are a step in the right direction. Butthere is a need to go further and toput in place a stronger frameworkfor coordination, convergence andenforcement of structural policies.In this context, the OctoberEuropean Council Conclusionscalled for further exploration of theidea of arrangements of acontractual nature betweenMember States and the EU

Arrangements of a contractualnature need to addressvulnerabilities at an early stage

that these essential markets canadjust quickly to shocks and thatnational frameworks facilitategrowth and employment.Contractual arrangements wouldthus need to focus onmicroeconomic, sectoral andinstitutional bottlenecks, and aim atenhancing the competitiveness andgrowth potential of the economy.The future contractual

This would take the form of an in-depth analysis by both parties,providing the basis for a tailor-made and detailed agreement onsome specific reforms. Dependingon the type of measures necessary,the length of these agreementswould vary for each country, butwould likely be of a multiannualnature. In order to maintain thefocus on key weaknesses, such

country-specific recommendations.In accordance with the objective ofearly detection, the in-depthreviews would be generalised to allEMU countries. In-depth reviewswould need to be based on a verythorough and on-the-grounddialogue and on analysis ofMember States' economies. Basedon the conclusions of the in-depthreview, the Commission's country-

Contractual arrangements need tobenefit from full domestic andEuropean ownership andaccountability

reporting to their respectiveparliaments (national andEuropean) on progress achieved.Full accountability of both partiescan only be ensured if the agreedreform agenda is specific, detailedand measurable. This requiresexante agreement on concretetimelines, on the specific modalitiesfor monitoring and on access toinformation. The agreements and

taken. The implementation of thisguiding principle is key to ensuringthe effectiveness of the integratedfinancial, budgetary and economicpolicy frameworks. This impliesthe involvement of the EuropeanParliament as regardsaccountability for decisions takenat the European level, whilemaintaining the pivotal role ofnational parliaments, as

national parliaments are not in thebest position to take it into accountfully. This implies that furtherintegration of policy making and agreater pooling of competences atthe European level should first andforemost be accompanied with acommensurate involvement of theEuropean Parliament in theintegrated frameworks for agenuine EMU.

single resolution authority shouldtake place at the European level,this should be complemented bystrong mechanisms for information,reporting and transparency tonational parliaments of theparticipating Member States.

Parliament and nationalparliaments on therecommendations adopted in thecontext of the European Semester.New mechanisms to increase thelevel of cooperation betweennational and European parliaments,for example building on Article 13of the TSCG and Protocol 1 of theTreaty, could contribute toenhancing democratic legitimacy

legitimacy and accountability. Thedetails of such arrangements wouldlargely depend on its specificfeatures, including its fundingsources, its decision-makingprocesses and the scope of itsactivities.

would ultimately need to beintegrated into the legal frameworkof the European Union. This isalready foreseen under the Treatyon Stability, Coordination andGovernance, and could beenvisaged also for other cases.Reinforcing the capacity of theEuropean level to take executiveeconomic policy decisions for theEMU is essential. Finally, as the

high degree of social cohesion, astrong participation of theEuropean and national parliamentsand a renewed dialogue with socialpartners. The openness andtransparency of the process as wellas the outcome are crucial to movetowards a genuine Economic andMonetary Union.