A three-point plan for Europe’s economic future


Picture of Stefano Micossi
Stefano Micossi

Honorary Professor at the College of Europe

My main points on the economic governance reforms to strengthen stability and revive growth in Europe centre on risk, disciple and symmetry, all of which need priority attention and speed to enact.

Our current risk-sharing system has evolved in the right direction in response to the economic crisis, but still lacks some essential components. Risk-sharing arrangements need to be complemented in the finalised Banking Union by supra-national deposit insurance, backed by a common budget in case of systemic a future banking crisis. The common budget could evolve gradually from the European Stability Mechanism (ESM), the common stabilisation fund. And in addition, the system needs to be provided with common insurance against idiosyncratic shocks hitting the sovereign debt market of highly-indebted countries, which requires lending of last resort by the European Central Bank (ECB) plus a common fiscal back up – which again could be built upon the ESM. The Resolution Fund should be fully mutualised at a more rapid pace and be expanded in size.

The internal market should be brought back to top of the European Council’s priority deliberations

Discipline and convergence need to be found. European economic policy has an excessive resort to rigid and over-complicated rules that will never be able to cover all possible contingencies. The alternative is to transfer direct enforcement powers, with greater room for discretionary evaluation, to a newly-established European Minister of Finance; serious consideration should be given to entrusting this function to the Commissioner for economic affairs.

The Macroeconomic Imbalances Procedure should be strengthened and become more symmetric, in the sense of establishing more consistent obligations between deficit and surplus countries. It should be stressed that this does not amount to a request that countries in strong payment positions should become less competitive; policy prescriptions could concentrate on market-opening measures – network utility services in particular – and on mobilising domestic private and public investment to absorb excess savings.

The internal market should be brought back to top of the European Council’s priority deliberations with determined action to open up the energy, telecommunications and transport markets, and to hastily achieve a fully-functioning digital market. A fast-track procedure, such as was used in the past for financial services, could help speed up all relevant legislation. The effective implementation by the member states of policies agreed in this domain by the Council and Parliament should become a key component of the country-specific recommendations.

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