Completing the euro. A road map towards fiscal union in Europe

This report is the result of the work of the 'Tommaso Padoa-Schioppa group', established by Notre Europe to reflect on the future of the Economic and Monetary Union. After a thorough analysis of the roots of the crisis, the report identifies three major challenges the euro area will have to solve in the coming decade:

+ Preventing large and persistent EMU heterogeneities
+ Making the EMU fiscal framework more sustainable and resilient to 'self-fulfilling solvency' crises
+ Breaking the nexus between national banks and national sovereigns with the establishment of an appropriate EMU framework for banking supervision and resolution.

To solve these challenges, the report proposes:

+ Completing and fostering the single market in order to allow the real exchange rate channel to work more effectively;
+ Creating an automatic cyclical stabilization fund outside the EU budget, to alleviate the effects of endogenously-generated EMU cyclical divergences;
+ Rebalancing fiscal rights and fiscal duties in the common currency area, in particular through the creation of a European Debt Agency which would serve as normal financing instrument for an amount of 10% of GDP to all countries but would also ensure adequately priced access to sovereign financing in crisis times;
+ Creating a euro area banking union, composed of a euro area banking supervision authority with micro-prudential powers and a euro area agency inspired by the US Federal Deposit Insurance Corporation (FDIC), combining the function of a banking resolution agency and a deposit guarantee scheme.

Notre Europe: EMU: long-term matters are urgent matters (Synthesis, 13.09.2012) http://institutdelors.eu/publications/emu-long-term-matters-are-urgent-matters/?lang=en

Notre Europe: Reform proposals for the euro zone (Tribune, 14.12.2012) http://institutdelors.eu/publications/reform-proposals-for-the-euro-zone/?lang=en

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