The survival of economic and monetary union will require the creation of new supra-national institutions, including a joint eurozone treasury and a separate euro parliament, according to the single currency’s bail-out chief.
Klaus Regling, head of the European Stability Mechanism (ESM), joined aclamour of voices in Brussels who are pushing for member states to cede sovereignty in bid to establish a full-blown fiscal union on the Continent.
The first step will be the creation of a eurozone finance ministry, backed by a separate chamber for the currency’s 19 member states in the European parliament, said Mr Regling, who oversees the euro’s €500bn rescue fund.
The move is necessary to “increase the robustness and minimise the vulnerabilities of the currency union”, said Mr Regling.
He added it would “imply a significant transfer of sovereignty, requiring democratic legitimacy”, which could be provided by a “special chamber of the European Parliament composed of deputies solely from euro area Member States”.
His comments follow on from Jean-Claude Juncker, president of the European Commission, who is pushing for the creation of a euro treasury, along with a system of common deposit insurance and beefed-up tax and spending powers for the European parliament.
Details of the new treasury – which would act as a finance ministry, pooling funds from euro member states – remain sketchy.
But the notion has long been championed by France who want to steer EMU away from simply an enforcer of fiscal discipline, into a true economic government of Europe. Paris has also called for the eurozone to have a permanent finance minister.
Benoit Couere, France’s executive board member on the European Central Bank, has called for the new treasury to be founded on the principles of the ESM – which currently pools contributions guaranteed by all members states for use in times of emergency financial stress.
The ESM will be providing up to €60bn of Greece’s latest rescue deal, and has been deployed to bail-out Spanish and Cypriot banks over the last three years.
But plans to forge ahead with a political and fiscal union are likely to meet fierce resistance in Berlin.
Germany, Europe’s largest creditor state and biggest contributor to eurozone rescue schemes, has rejected surrendering tax and budget powers to Brussels before tougher rules are put in place to limit spending and punish errant governments – including the French.
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“It’s much more of a French idea rather than something according to Germany’s vision for the euro,” said Michael Wohlgemuth, director of the Open Europe think-tank in Berlin. “Germans don’t even have a word for ‘treasury'”.
“The body could act as something like a European Monetary Fund but the prospect of seeing the vision through are very small,” added Mr Wohlgemuth.
Mr Regling said any transfer of budgetary powers should be carried out without “permanent fiscal transfers or further debt mutualisation” – both concepts which are anathema to Berlin.
Forging new eurozone institutions would also require amendment to the EU’s current legal settlement, re-opening the Lisbon Treaty.
Such a legal shake-up is seen as a “Pandora’s box” among EU elites, requiring parliamentary ratification across all 28 member states, including Britain.
For all the insistence on “ever greater union”, the euro’s top officials are increasingly concerned that a quantum leap into a full-scale political union will not be viable without popular support.
An unusually austere Mr Juncker warned MEPs this week that the euro could no longer run on “auto-pilot”, devoid of democratic legitimacy.
“The European Union is a dynamic project. A project to serve its people. There are no winners or losers. We all get back more than we put in. It is one, comprehensive project,” he said.