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30 January 2014

ECB/Cœuré: Is eurozone governance fit for purpose?


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Cœuré spoke on how the balance of competences between the national and the euro area level had evolved during the crisis, saying that national ownership of the reforms prescribed by European procedures and recommendations had to be strengthened.


Clearly, the Maastricht model – or at least its implementation by Member States – proved inadequate to pass the economic "fitness test" when the crisis erupted. The past years have shown to what extent euro area economies and financial systems are interconnected; how decisions by individual countries can affect the entire currency union; and why national economic policies need to be seen as "a matter of common concern".

In my view, the European level should be allowed to intervene in national policies – or even be granted new competences – only to the extent that is necessary to account for interdependencies. Equally, national economic policies should take into account the existence of potential spillovers to other members of the currency union. The approach followed so far implies that the competence for economic policy-making is increasingly being shared between the European and the national level. But citizens should be able to identify who is responsible for what. Here I believe that EMU still has some way to go before passing the "fitness test".

Overall, significant progress has been achieved: We are now starting to see the results of our actions to resolve the crisis. Moreover, with the new governance framework the Member States have taken key steps towards internalising economic and financial spillovers within EMU. This has entailed a shift of the balance of competences upwards: the central level has been substantially strengthened to make the euro area more stable and resilient. Fully enforcing the new rules of the game will however be the crucial test. At this stage, the implementation of the new macroeconomic framework has been somewhat disappointing in non-programme countries, notably regarding country-specific recommendations.

The Four Presidents’ Report identified "political union" as one of the four building blocks of a genuine EMU. It put forward a number of proposals. Some of the momentum behind the discussions on these proposals has been lost. It is not up to the ECB to promote them. But we would welcome policy-makers restarting the discussion and not shying away from ambitious proposals. I see several possible options to enhance effectiveness and legitimacy:

  • First, by strengthening the European dimension of multilateral surveillance. A full-time Eurogroup President with proper analytical capacity and more autonomous decision-making powers could be a step in the right direction. This could be accompanied by stronger accountability towards the European Parliament, in particular for the implementation of the governance framework.
  • Second, it would also be important to strengthen the national ownership of the reforms prescribed by European procedures and recommendations.

By fostering a public debate and bringing political preferences closer together within the euro area, the move towards political union may in fact arouse interest in a further deepening of integration. However, I believe this further sharing of sovereignty will only happen if Europe is able to deliver tangible progress for its people in terms of stability, growth and job creation.

Full speech



© ECB - European Central Bank


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