Barroso Unveils Euro Survival Plan
The euro zone should gradually acquire the powers of a national government with a single treasury and the right to tax or issue commonly backed bonds under a Brussels blueprint to ensure the single currency's longer-term survival.
The plan, unveiled on Wednesday by José Manuel Barroso, president of the European Commission, attempts to create an embryonic budget for the euro zone almost immediately. It calls for a fund to be set up within the next 18 months that could provide incentives to struggling countries attempting to overhaul their economies.
The fund, which under the 51-page blueprint would grow into a full-scale euro zone treasury, would initially only provide aid to euro zone countries that sign contracts with Brussels committing themselves to reform programs — a process similar to current bailouts of Greece, Ireland and Portugal.
However, all euro zone countries that currently violate EU budget debt and deficit rules would be required to sign the contracts, not just those subject to international financial rescues.
Mr Barroso said the centralization of power over the euro zone was needed to ensure the future survival of the single currency and warned national leaders that they risked reigniting market panic if they did not show more urgency towards changing the way the currency union is governed.
"We must counter this crisis of confidence by showing that we are ready to move ahead and strengthen co-operation and integration," Mr Barroso said. "I'm concerned that now, not all capitals have the same sense of urgency they had some months ago."
Many of the shorter-term proposals are working their way through the EU's Byzantine legislative process, particularly in relation to "banking union". Governments are tussling over the creation of a single supervisor for all euro zone banks and Mr Barroso said he would soon deliver a long-awaited proposal for a common bank bailout and "resolution" system.
However, the plan provided no detail about the third leg of a banking union: a euro zone-wide deposit guarantee scheme.
The document only urges member states to create their own national schemes and makes almost no mention of a euro zone-wide deposit insurance, which many analysts believe is necessary to prevent runs on banks in struggling euro zone countries.
Mr Barroso insisted he had not abandoned the idea, but it remains intensely controversial in Germany, where politicians and bankers see it as a way to get German taxpayer backing for shaky Spanish and French banks.
The blueprint is more ambitious in the relation to fiscal and economic union where officials have acknowledged that recent post-crisis reforms have stalled because of limits in EU treaties.
In the medium-term — which Mr Barroso defined as anywhere during the next 18 months to five years — Brussels would gradually gain powers to veto measures or require amendments in national budgets as well as raise money on its own for the new euro zone budget through taxes or debt issuance.
The move to commonly backed euro zone bonds would take place in steps, starting with powers to issue commonly backed short-term treasury bonds with one- or two-year maturities and only later proceeding with full-scale "eurobonds".
Even such gradual measures would require changes to the EU treaties, the blueprint acknowledges, a process Mr Barroso has argued should occur after the next European Parliamentary elections in 2014.
The blueprint also proposed political reforms to ensure that a newly empowered Brussels is more accountable to European voters. But they remain sketchy, focusing on the need to give the European parliament — the only directly elected EU institution — more power over other Brussels bodies.