My speech at the Ambrossetti Forum : the future of the euro

Ambrosetti Forum – Panel on “The future of the euro” – introductory remarks

Dear fellow panelists [Clemens Fuest, Jeroen Dijsselbloem, Nouriel Roubini – Wolfgang Schüssel],

Ladies and gentlemen,

Let me start by underlining the first implication of this panel’s title: it is that the euro doesindeed have a future. Many questioned this simple truth just a few short years ago!

But I am convinced that the euro area will only have a truly bright future if we address three burning political issues: the lack of democracy in its decision-making structures; the need to ensure that a future European Monetary Fund is successfully built on democratic principles; and the economic and social divergences creating a dangerous political divide between countries.

I would like to share with you my assessment of these challenges and my ideas for tackling them.

[Reforming our governance to address the democratic deficit]

The first issue is the lack of democracy in our existing structures.Let’s face it, the Eurogroup as we know it is rather a pale imitation of a democratic body.

Jeroen, this is no reflection on your presidency. You have provided very effective leadership in the most challenging of times and you have taken steps to increase transparency.

But the problem is a structural one. We are talking about decisions that are first prepared by officials – in almost complete opacity– and then taken by Ministers behind closed doors, often after very limited discussions,and with no formal rules. Unlike in a normal Council formation, the European Commission does not have the prerogatives in the Eurogroup to promote and advance the general interest of the euro area as a whole. Major decisions are taken on national budgets and reforms and no one is – or feels – accountable for these decisions to the European Parliament.

I would go so far as to say that this flaw in the governance of EMU is a democratic deficit, and sometimes in the past, when we look at Greece, it has beenclose to a democratic scandal.

As you can gather from what I have already said, I believe that our Economic and Monetary Union requires a quantum leap forward on the institutional front to fix this political vacuum. We cannot go on having the main decision-making forum for the euro area detached from the most basic democratic standards, as enshrined in the Community method.

Reformingthe euro area’s governance is also a prerequisite for increased solidarity. Any strengthening of EU powers must be reflected in a more democratic euro area.

It is no secret that I believe this institutional rebalancing should be achieved through the creation of a High Representative-type figure responsible for the economic and financialaffairs of the euro area. This figure should:

  • Be institutionally robust, by combining the roles of European Commissioner for Economic Affairs, my successor, and President of the Eurogroup.
  • Be democratically legitimate. This means, she or he, would be accountable to the European Parliament. As I indicated earlier, Eurogroup decisions should be subject to proper oversight by Europe’s elected representatives.
  • Be technically supported by a euro area Treasury, which would be responsible for economic and fiscal supervision, coordinating the issuance of a European safe asset and managing the macroeconomic stabilisation mechanism – on which I will say more in a moment. To put it more simply, sheor he would be in charge of coordinating the economic policy of the euro area.

[Ensuring that a future European Monetary Fund is built on a democratic basis]

The second political issue we must address is the possible establishment of a European Monetary Fund.

Let me say this upfront: setting up an EMF could be a very positive development for the euro area. But we need to be very clear about its functions and its design. And on these, I strongly disagree with the ideas envisaged by some.

I believe that anill-conceived EMFwould be one that placed even more major decisions on national budgets, public finances or structural reforms under the responsibility of unaccountable officials. Such an EMFwouldsimply deepen the democratic deficit of the euro area. I fail to see how this would be an improvement for the euro area, or even an acceptable development.

In particular, in those areas where the Treaty enshrines the Community method and entrusts EU institutions with specific competences, there can be no scope for intergovernmental approaches. This is the case for example in the area of euro area economic surveillance, where I strongly advocate for the role of the European Commission, and not only because I am a member of it now.

On the other hand, a well-conceived European Monetary Fund would be one that supports Member States in managing their public debt and ensuring the resilience of their economies. Such anEMF should be closely tied to and should complement the work of the European Commission, the EU’s executive, which by definition acts in the general interest of the EU. Like the Commission, it should be accountable before the European Parliament.In short, if the EMF is conceived not as another intergovernmental structure created to mechanically apply ever more automatic rules, but as a democratic, Community institution – then I would be more than willing to support it. I think that is also the general mood inside the Commission.

 [Tackling divergence]

The third political issue for the euro area is our economic and social divergences. That’s precisely what creating the euro area was about.

The euro area is today enjoying a strengthening economic upswing, which has been firming and broadening across sectors and Member States.Unemployment is at lowest in eight years; confidence is at its highest in a decade.

But this picture is marred by theeuro area’spersistent economic and social divergences.To name but three: Italy’s public debt is double that of Germany; Germany’s current account surplus is twice the euro area average; while its unemployment rate is half the euro areaaverage.

Where do these divergences come from? There are several factors at play, but one in particular should be highlighted: the legacy of the crisis, which continues to weigh heavily, but unevenly, on our economies. It manifests itself through high public and private debt, high long-term and youth unemployment, and too lowinvestment. The fragmentation of the financial sector and enduring weaknesses in the banking system are also part of this legacy.

These divergences are problematic onseveral levels:

  • First, they make it harder to manage our economy. You just have to think of how difficult it is to plot an overall course for fiscal policy in the euro area, one which also makes sense for each of the Member States themselves.
  • Second, they mean that the return to growth will not benefit all members of the euro area equally, which means we won’t have the same support for the euro area evenly.
  • And third, they have a political dimension which mustbe taken into account. The social and economic disparities make it more difficult to agree on the common interest of the euro area and on a shared vision for its future. They also undermine the promise of shared prosperity, which was central to the political consensus that drove the creationof the euro.

We must deal with these differences by puttingin place pro-active tools for re-convergence within the euro area.The idea of a “fiscal capacity for the euro area” has been discussed for many years in Brussels and other European capitals. Now it is time to be concrete. What form should this tool take: a public investment protection system in the case of recession?A European unemployment re-insurance mechanism?How would the revenue be raised? Under what conditions would money be disbursed?

And in the medium-to-long term,it will be necessary to establish a genuineEuropean safe asset. This safe asset would ultimately be a new instrument for issuing common debt. The existence of a safe asset in the euro area could give the issuing authority – the European Treasury, for example – new and indirect leverage for disciplining States; particularly because access to this preferential form of financing would be limited. As soon as a Member State pursued a fiscal policy which did not comply with the common rules, the cost of the additional debt would increase incrementally. The deterrent would therefore not be penalties, but increased costs.  A safe asset wouldtherefore ensure solidarity but also require responsibility, since it would encourage the return of market discipline to the system.

Eventually, in this gradual and sequenced introduction of new instruments of cohesion and governance, the time would come to reform our budgetary surveillance rules,to make them simpler, more effective and more democratic. And they are more complicated when all countries are outside the Excessive Deficit Procedure, which I hope will be the case from next year once France and Spain exit.


To me the future of the euro area can be bright if we manage to successfullyaddress these three burning issues: our democratic deficit, the need to get the EMF right,and our social and economic divergences.

I am aware that some of theproposalsI have outlined are as ambitious as they are controversial. I know we cannot change the EMU landscape overnight – but we cannot afford to sit on our hands for years either. The political window of opportunity is now: certainly by next summer we need to see real progress, before we enter into a new European electoral cycle. So my motto is this: let’s seize the moment.

Thank you.

2 réflexions au sujet de « My speech at the Ambrossetti Forum : the future of the euro »

  1. This way of rigid and narrow-minded thinking by Pierre Moscovici c.s. is extra-ordinarily worrying. It is astonishing that, after almost 8 years of devastation by the destructive rigid one-size-fits-none Euro Pact, there is still no sense of reality and understanding at all that the given economic divergences between the euro-countries lead to only one conclusion: the urgency for the (re)establishment of national exchange- and interest-rates, so the urgency for the decentralization or (perhaps better) flexibilization of the monetary union.

    For the way to make the Euro Pact flexible, see here:

  2. I hope people aren’t taking Moscovici’s demagogic ramblings seriously. His socialist chicanery would dive the EU deeper into even greater trouble than it already is in. A warning to you all, this man is only interested in his career which will still unfortunately be in tact when Southern European countries suffer from increased economic woes as a result of these highly inefficient policies.

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