Policy Paper : Economic and Monetary Union reform: political ambition or division

Fondation Robert Schuman, European Issues, 17th Decembre 2013

The reform of the Economic and Monetary Union launched by the European Council in June 2012 stands as a long term answer to the intrinsic weakness of the euro, which became apparent during the severe crisis lasting from 2010 to 2012. A review of the entire scheme, which rests on two pillars - Banking Union and economic governance, is planned for the European Council of December 2013. Here we put forward the decisive steps achieved with this reform as well as its potential shortfalls. This will lead us to some proposals. The profile of Banking Union is now being defined. Some questions are being raised about decision making procedures, which still rely excessively on colleges formed by Member States. Moreover regulatory divides between the euro zone and the rest of European Union could emerge. As for economic governance the framework set in place is starting to work. The strengthening of decision making bodies, the simplification and definition of new tools, notably to correct deviant national trajectories - these are the lines of progress to be achieved. Mid-term the path to a euro zone budget has to be set down. This step would complete the ambitious structure of the single currency. Hence the euro would, together with the European Central Bank, be given its second vital base. Progress like this, which would introduce real economic government, should be prepared with an institutional reform of the euro zone - a major element that is missing from the present roadmap.