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Brussels presents plan for European Monetary Fund

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Brussels presents plan for European Monetary Fund

Valdis Dombrovskis - Photo EC

(BRUSSELS) - The EU Commission presented Tuesday a roadmap for deepening Economic and Monetary Union, including plans for a European finance minister. and the establishment of a European Monetary Fund.

The Commission says the overall aim of the package, which includes concrete steps to be taken over the next 18 months, is to enhance the unity, efficiency and democratic accountability of Europe's Economic and Monetary Union by 2025.

"Today the European Commission is taking another step in the ongoing process of building a more stable and prosperous economic and monetary union," said Valdis Dombrovskis, EC vice-president in charge of the Euro: "The measures we are presenting today will support Member States in their work towards more resilient economies, strengthen EU level shock absorption and crisis management mechanisms, and support the process of convergence both within and among Member States."

The EU executive says 'deepening the Economic and Monetary Union (EMU) is a means to an end: more jobs, growth, investment, social fairness and macroeconomic stability'.

The economic and financial crisis laid bare some of the euro area's 'institutional weaknesses', it adds. Almost ten years later, it can point to a robust recovery with economic growth in all EU Member States. Unemployment is also at its lowest level since 2008, economic sentiment at its highest since 2000, and Europeans are showing the highest level of support for the single currency since the introduction of euro notes and coins.

In addition to the Roadmap, the package includes four main initiatives:

  1. A proposal to establish a European Monetary Fund (EMF), anchored within the EU's legal framework and built on the well-established structure of the European Stability Mechanism (ESM). In recent years, the ESM has played a decisive role in safeguarding the stability of the euro area by assisting Member States to regain or maintain access to sovereign bond markets. The EMF would build on the ESM architecture, with its current financial and institutional structures essentially preserved, including when it comes to the role played by national parliaments. It would thus continue to assist euro area Member States in financial distress. In addition, the EMF would provide the common backstop to the Single Resolution Fund and act as a last resort lender in order to facilitate the orderly resolution of distressed banks. More rapid decision-making in cases of urgency and more direct involvement in the management of financial assistance programmes are also foreseen. Over time, the EMF could also develop new financial instruments, for instance to support a possible stabilisation function. The European Parliament and the Council are invited to adopt this proposal by mid-2019.
  2. A proposal to integrate the substance of the Treaty on Stability, Coordination and Governance into the Union legal framework, taking into account the appropriate flexibility built into the Stability and Growth Pact and identified by the Commission since January 2015. In 2012, the 25 signatory Member States legally committed to incorporate the substance of that Treaty into Union law five years after its entry into force, which corresponds to 1 January 2018. The European Parliament has also called for this. The proposal incorporates into Union law the main elements of the Treaty in order to support sound fiscal frameworks at national level and is fully in line with existing rules defined in primary and secondary legislation. The European Parliament and the Council are invited to adopt this proposal by mid-2019.
  3. A Communication on new budgetary instruments for a stable euro area within the Union framework setting out a vision of how certain budgetary functions essential for the euro area and the EU as a whole can be developed within the framework of the EU's public finances of today and tomorrow. The Communication discusses four specific functions: a) support to Member States for structural reforms through a reform delivery tool and technical support at the request of Member States; b) a dedicated convergence facility for Member States on their way to joining the euro; c) a backstop for the Banking Union, through the EMF/ESM, to be agreed by mid-2018 and made operational by 2019; and d) a stabilisation function in order to protect investments in the event of large asymmetric shocks. The Commission will present the necessary initiatives in May 2018 in the context of its proposals for the post-2020 Multiannual Financial Framework. The European Parliament and the Council will then be invited to adopt these proposals by mid-2019. For the period 2018-2020, the Commission is also proposing to strengthen the Structural Reform Support Programme, by doubling the funding available for technical support activities, thus reaching €300 million up to 2020. The Commission is also proposing to test the new reform delivery tool in a pilot phase. To that end, it proposes targeted changes to the Common Provisions Regulation governing the European Structural and Investment Funds (ESIF) in order to extend the possibilities to use part of their performance reserve in support of agreed reforms. The European Parliament and the Council are invited to adopt these latter two proposals in 2018.
  4. A Communication spelling out the possible functions of a European Minister of Economy and Finance who could serve as Vice-President of the Commission and chair the Eurogroup, as is possible under the current EU Treaties. By bringing together existing responsibilities and available expertise, this new position would strengthen the coherence, efficiency, transparency and democratic accountability of economic policy-making for the EU and the euro area, in full respect of national competences. Reaching a common understanding on the role of the Minister by mid-2019 would allow setting it up as part of the formation of the next Commission. The Eurogroup could then also decide to elect the Minister as its President for two consecutive terms in order to align both mandates.

A new Flash Eurobarometer on the euro area published today shows that 64% of respondents say the euro is a good thingfor their country.

Further Information

Deepening Europe's Economic and Monetary Union – 
background guide

Factsheets on Deepening Europe's Economic and Monetary Union
Communication on further steps towards completing the Economic and Monetary Union
Proposal for the establishment of a European Monetary Fund anchored in the Union legal framework
Proposal to integrate the substance of the Treaty on Stability, Coordination and Governance into the Union legal framework, taking into account the appropriate flexibility built into the Stability and Growth Pact and identified by the Commission since January 2015
Communication on new budgetary instruments for a stable euro area within the Union framework
Targeted changes in the Common Provisions Regulation to mobilise funds in support of national reforms
An amendment to strengthen the Structural Reform Support Programme
Communication on a European Minister of Economy and Finance


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