The European Commission unveiled plans for a fundamental overhaul of how the euro zone is structured on Wednesday, including the prospect of setting up a common budget for the single currency area and issuing joint debt in the years ahead.
In a five-page document dubbed a “blueprint” for creating a “deep and genuine” economic and monetary union, Commission President Jose Manuel Barroso acknowledged that the 17 countries in the euro zone needed to be allowed to integrate more deeply and at a faster rate than the rest of the 27-country bloc.
In that respect, he breached a taboo over a “two-speed Europe,” saying that without allowing it to happen, it would not be possible to create a stronger and more stable euro zone. He also said much tighter oversight of economies was necessary.
“In a deep and genuine economic and monetary union, all major economic and fiscal policy choices by member states would be subject to deeper co-ordination, endorsement and surveillance at the European level,” Mr. Barroso told reporters, adding later:
“The euro area must be able to integrate quicker and deeper than the EU at large.”
Mr. Barroso set out his proposals in three time frames: those that can be tackled in the next six to 18 months; those that will take 18 months to five years; and those that will only be achieved from 2018 on, in the final stage of monetary union.
Many of the short-term ideas have been under discussion for several months or are already being implemented after they were presented by European Council President Herman Van Rompuy in October and endorsed by the EU’s leaders.
Mr. Van Rompuy’s report, entitled “Towards a genuine economic and monetary union” and involving contributions from Mr. Barroso, European Central Bank President Mario Draghi, and the president of euro zone finance ministers, Jean-Claude Juncker, set out a plan to create a banking and fiscal union for the euro zone.
It also raised the need to establish an “economic union,” with closer integration of the single market, and a “political union,” with more democratic accountability, if the EU was to form a more stable and enduring currency and economic bloc.
Mr. Barroso’s “blueprint” has not veered far off Mr. Van Rompuy’s template, but has made some amendments and additions, including the idea of a “convergence and competitiveness instrument” inside the EU budget which would be used to help countries implement structural reforms.
But it is in his longer-term vision that Mr. Barroso made more radical proposals, reviving ideas that were raised at the peak of the debt crisis in 2011 and earlier in 2012, but were firmly opposed by Germany and largely suppressed as a result.
Those ideas include the joint issuance of bonds by euro zone countries, a process that would effectively involve the 17 member states underwriting one another’s obligations.
“A deeply integrated economic and fiscal governance framework could allow for the common issuance of public debt, which would enhance the functioning of the markets and the conduct of monetary policy,” Mr. Barroso said.
“This would be the final stage in EMU.”
At a news conference, Mr. Barroso was asked why he was putting forward his own ideas for overhauling economic and monetary union when he was already supposed to be working with Mr. Van Rompuy and others on a nearly identical set of proposals.
He dismissed the suggestion that he was launching a competing vision, saying that under the EU’s treaties, it is the European Commission that has the power to initiate legislation and it was merely fulfilling that long-established mandate.
Still, for investors and those wanting the EU to present a clear, unified set of policies after years of messy decision-making during the crisis, there is a risk Mr. Barroso’s vision may appear to either compete with or cloud out Mr. Van Rompuy’s.
Any differences of opinion will have to be resolved in the next two weeks, since Mr. Van Rompuy’s next update on progress towards a banking and fiscal union will be presented to EU heads of state and government at a summit on Dec. 13-14.