Perspectives for the future development of the Economic and Monetary Union

With the benefit of hindsight, one has to admit that the euro area of March 2018 is qualitatively quite different from the euro area of 2008. At that time, it was entirely preoccupied with  weathering the intense pressure of the economic crisis, with the impact of the crisis serving to underscore its fragility. But over time, the more the euro area has absorbed the lessons from the crisis, the more robust it has become, not only in terms of its economic performance and stability, but also thanks to its better-equipped tool-box.

When talking about the new building blocks of the euro are, we have in mind not only the steps to make the euro area more functional and stable, but also those taken to strengthen economic governance over the past 8 years, representing a benchmark for discipline, responsibility and performance on the part of both the individual euro area member countries and of the EU economy as a whole.

In December 2017, the European Commission announced a set of documents jointly constituting a package of next steps towards the completion of the EMU in the form of a plan and road map for its foreseeable future. It represents more than a parametric change: we could refer to it as a change within the system.

It contains a set of five mutually interconnected measures following on from the previous activities to improve the EMU framework. It operates by means of a European Monetary Fund set up as a successor to the European Stability Mechanism, and as a back-stop for the Banking Union and its Single Resolution Mechanism. It also incorporates the Fiscal Compact into the EU legislative framework, including the principle of appropriate flexibility allowing the criteria of fiscal discipline to be adjusted to the concrete conditions and needs of particular Member States.

The third part of the package consists of an innovative proposal to introduce new budgetary instruments for a stable euro area within the EU. This proposal is the fruit of a compromise as part of  efforts to ultimately create an autonomous euro area budget. The proposal specifies that a stronger euro area budget line is to be incorporated explicitly within the existing EU Budget (as opposed to creating a special budget for the euro area at this point in time). The stability of the euro area is to be focused on domains such as investment activity, employment or the creation of a fund for less positive periods. Part of this stability function will also be provided by an instrument to assist countries entering the euro area in the form of technical and financial support.

The fourth part offers some support for structural reforms in Member States and creates a space for this by setting up a cross-border platform covering the combined euro area/ EU area (reflecting the concept of EVA – European value added).

And finally, the fifth point concerns an institutional adjustment to all of these proposed changes, an "umbrella" responsible for all these issues in the form of a European economic and financial minister. This will be probably the most attractive part of the package from the media's point of view.

It is true to say that most of the measures contribute to the integrity of economic and fiscal governance in the EU as well as to the effective functioning of the Single Market, the greatest achievement of economic integration in Europe to date.

Petr Zahradník
Member of the Employers' Group
Czech Chamber of Commerce

Work organisation