Deepening Europe’s Economic and Monetary Union: Commission takes stock of progress

This article is brought to you in association with the European Commission.

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Ahead of the Euro Summit on 21 June 2019, the European Commission today takes stock of the progress made to deepen Europe’s Economic and Monetary Union since the Five Presidents’ Report and calls on Member States to take further concrete steps. In the four years since the publication of the report, marked progress has been made to strengthen the single currency area and make Europe’s Economic and Monetary Union more robust than ever. Many of the gaps revealed by the post-2007 economic, financial and social crisis have been addressed. Yet, important steps still need to be taken. The single currency and the coordination of economic policy-making are means to an end: more jobs, growth, investment, social fairness and macroeconomic stability for the members of the euro area as well as the EU as a whole. European Commission President Jean-Claude Juncker said: “This Commission has fought hard for the completion of the Economic and Monetary Union: a lot has been achieved but a lot remains to be done. This is about creating jobs, growth and social fairness for our citizens. It is about preserving the stability and resilience of our economies and it is about Europe’s capacity to take its future into its own hands.” Ahead of the Euro Summit of 21 June, the Commission invites EU leaders:

• To reach an agreement on the main features of the Budgetary Instrument for Convergence and Competitiveness with a view to supporting a swift adoption by the European Parliament and the Council. To agree on its size in the context of the Multiannual Financial Framework.
• To finalise the changes to the Treaty establishing the European Stability Mechanism with a view to a swift ratification by the euro-area Member States, including an operational and effective common backstop, the provision of liquidity in resolution and active and effective precautionary instruments. To preserve a clear delineation of responsibilities between actors and the possibility to adjust the EU Single Rulebook for banks according to the Community method. To integrate the European Stability Mechanism into EU law over time.
• To make a renewed effort to complete the Banking Union starting with political negotiations on the European Deposit Insurance Scheme.
• To accelerate progress on the Capital Markets Union and step up work to strengthen the international role of the euro.

The Commission also reviews the main progress of recent years beyond the deliverables expected at the Euro Summit of June 2019 and maps out the way forward for the coming years. Since the Euro Summit of December 2018, discussions have proceeded on the future Budgetary Instrument for Convergence and Competitiveness for the euro area, building on the Commission’s proposal for a Reform Support Programme; a compromise is within reach and should be taken forward with determination. Discussions have also taken place on the reform of the European Stability Mechanism, in particular to provide for a backstop to the Single Resolution Fund in the form of a credit line. The backstop is expected to serve as a last resort to support effective and credible bank crises management within the Single Resolution Mechanism. It will be repaid via contributions from the European banking sector. The completion of the Banking Union and Capital Markets Union (CMU) is also essential when it comes to bolstering the resilience and stability of the euro. Significant progress has been made in further reducing risk in the Banking Union. The Commission’s latest progress report shows that the ratio of non-performing loans for all EU banks continues to decline and is down to 3.3% in the third-quarter of 2018, continuing its downward trajectory towards pre-crisis levels. Looking ahead, it is essential to progress with a common deposit insurance scheme for the euro area. The CMU will foster further market integration and help ensure that Europe’s capital markets can withstand major internal or external challenges to the stability of the Economic and Monetary Union. Encouraged by Leaders in December to continue its work on the file, the Commission also takes stock of the ongoing work towards developing the international use of the euro. The euro is twenty years young and is the world’s second currency, which remained strong even at the height of the financial and debt crisis. To understand better how to boost the global use of the euro – and to identify any obstacles to this – the Commission in recent months actively consulted market participants in different sectors (foreign exchange, energy, raw materials, agricultural commodities and transport). These consultations showed that:

• there is broad support for reducing dependence on a single dominant global currency;
• the euro is the only currency with all of the necessary attributes that market participants seek to use as an alternative to the US dollar;
• the energy sector will remain a key currency driver of use of the euro, with scope to further increase its use, such as in the gas sector;
• there is recognition that the EU, through the euro, can reinforce its economic sovereignty and play a more important global role to benefit EU business and consumers.

The Commission, together with the European Central Bank, will continue to work with Member States, market participants and other stakeholders, and calls upon the European Parliament, the Council and all interested parties to support the efforts increase the international role of the euro.  Background Almost exactly four years ago, President Jean-Claude Juncker, together with the President of the Euro Summit, Donald Tusk, the then-President of the Eurogroup, Jeroen Dijsselbloem, the President of the European Central Bank, Mario Draghi, and the then-President of the European Parliament, Martin Schulz, published an ambitious plan on how to deepen Europe’s Economic and Monetary Union (EMU) by latest 2025. Building on the vision of the Five Presidents’ Report, the Commission followed up with the White Paper on the Future of Europe of March 2017, the thematic Reflection Papers on the Deepening of the Economic and Monetary Union and the Future of EU Finances in May 2017. In December 2017, the Juncker Commission set out a roadmap and adopted a number of concrete proposals with the overall aim of enhancing the unity, efficiency and democratic accountability of Europe’s Economic and Monetary Union by 2025.