At the Eurofi Financial Forum 2018 in Vienna, the EC Vice President Valdis Dombrovskis discussed the completion of the Economic and Monetary Union of the EU and outlined three priorities in this area. The priorities involve reforms by the member states to become more resilient and competitive, building more integrated and shock-resistant financial markets, and strengthening of the crisis-management tools.
Mr. Dombrovskis mentioned that the 20-year anniversary of euro is coming up and, despite the important institutional reforms to strengthen its resilience, the architecture of the Economic and Monetary Union remains incomplete. Thus, in December 2017: “EC put forward a Roadmap to deepen the Economic and Monetary Union, followed by several concrete proposals. By putting in place these missing pieces, we could support our future prosperity, help guard against another financial crisis, and strengthen the international role of the euro.” Next, he discussed the three priorities for the completion of the Economic and Monetary Union:
- Structural reforms in member states. Since last year, EC has a program offering technical support to design and implement growth-enhancing reforms in all member states. It has been very successful, supporting almost 350 reform projects in 25 EU countries. For the next Multiannual Financial Framework, the seven-year budget of EU, EC has proposed a Reform Support Program, which is a comprehensive toolbox to foster reforms in all EU countries. Discussions on this proposal have started, and EC hopes to make rapid progress toward its adoption.
- Integrated and shock-resistant financial markets. The Banking Union is still incomplete and two missing elements still need to be put in place. The first element is a backstop to the Single Resolution Fund, which was agreed by member states in 2013. The second missing element is a European Deposit Insurance Scheme. EC tabled its proposal in 2015 and last October presented additional ideas to help reach a compromise. Euro area heads of State and Government have now agreed to advance work on a clear calendar that will allow the launch of political discussions. In parallel, progress has been made toward reducing risks in the banking sector. EC is working closely with the European Parliament and member states to finalize the banking package, which puts internationally agreed standards into EU law. It is also working together to reduce non-performing loans (NPLs) in the EU banking sector. EC recently put forward a package of proposals to support further NPL reduction, which is advancing well with co-legislators. Additionally, EC has already put on the table a range of proposals to build the different elements of the Capital Markets Union. However, so far, 10 out of 13 proposals are still under discussion by EU co-legislators.
- Strengthening crisis-management tools of the Economic and Monetary Union. EC proposed a European Investment Stabilization Function as part of the proposal for the next Multiannual Financial Framework. This Function is designed to intervene early by providing subsidized loans to support public investment. Investment is often the first item that is cut in a crisis. By providing fiscal support before a shock spirals into a crisis, the aim is to facilitate a rapid recovery and avoid deeper recessions. Use of the Function would be subject to strict criteria of sound macroeconomic and fiscal policies. EC believes that this proposal is a good basis for discussion in the ongoing Economic and Monetary Union deepening debate.
Related Link: Speech
Keywords: Europe, EU, Banking, Securities, Banking Union, Capital Markets Union, Economic and Monetary Union, Deposit Insurance, NPLs, EC
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