EP sets out its vision for a stronger economic and monetary union

The economic and financial crisis that, for four years now, has been sending shock waves across Europe has exposed the fault lines in the eurozone's architecture. To guarantee the euro's survival, the European Parliament is calling for legislation that deepens and reinforces the Economic and Monetary Union (EMU).

This week, MEPs will vote a report by Marianne Thyssen MEP listing the European Parliament's political priorities for reinforcing the EMU as well as the legislative initiatives it expects from the European Commission. The report outlines the European Parliament's position on the roadmap that is being prepared by the Presidents of the EU Council, the Commission, the ECB and the Eurogroup and that should be adopted at the December Summit of the European Council.

Ahead of this week's plenary vote, Thyssen's report was adopted last month by a large majority of Christian-Democrat, Liberal, Social-Democrat and Green MEPs in the Economic and Monetary Affairs Committee. This vote was a clear signal to the Member States that the European Parliament expects a thorough overhaul of the EMU's architecture.

To achieve this, the EMU's so-called four pillars (financial, budgetary, economic and democratic) must be strengthened. The European Parliament emphasizes that it should be involved in all measures that reinforce the EMU's architecture and that, across the board, more accountability towards the Parliament is necessary.

A banking union for greater financial stability

The Commission proposal for an integrated banking market with a single banking supervisory system, launched in September, is an important stepping stone towards a stronger EMU and greater financial stability. Marianne Thyssen, who is also Rapporteur - and therefore responsible in Parliament - for this dossier, emphasizes that MEPs want to see the banking union implemented quickly, especially as it allows the European emergency fund to recapitalise banks directly, thereby severing ties between banks and national budgets.

If banks are put under common supervision this will also help relieve some of the market pressure on Member States and help them get lower borrowing costs, thereby easing their debt levels. Confidence in banks too should be restored if there's a reliable supervision of the sector.

The role of the European Banking Authority (EBA) in relation to the banking supervisory system should be clarified and strengthened. Non-eurozone Member States should have the option to participate in a fair and equal manner in the supervisory system.

For MEPs, the transparency and democratic accountability of the supervisor towards the European Parliament (EP) is vital. Therefore the Chair of the banking supervisor should be appointed only after a successful hearing by the EP and, once in function, should report to the EP.

Furthermore, the EP asks the Member States to find a quick solution on deposit guarantees to safeguard consumers' savings. A third component of the banking union is a common framework for restructuring and the settlement of banks in financial trouble.

As regards the budgetary, economic and political pillar of the EMU, Thyssen emphasizes that, first and foremost, existing legislation needs to be implemented.

A budgetary union for clear rules and more control

Healthy Member State budgets are a vital condition for economic stability and growth. A European system of checks and balances must ensure that Member States comply with their budgetary obligations. In this light, the so-called two-pack, which aims at reinforcing budgetary coordination and protecting Member States with financial difficulties, needs to be adopted and implemented rapidly.

Again, the EP stresses the need for greater democratic legitimacy. This can be achieved by making the European Commissioner for Economic and monetary affairs and the Euro more accountable to the European Parliament, while at the same time reinforcing his role. In addition, all stakeholders involved in coordinating economic policies in the framework of the European Semester, would need to explain their decisions in the European Parliament.

As regards common debt issuance, the EMU Report emphasizes the need for a gradual transition towards a redemption fund should the necessary conditions be fulfilled. These include the creation of sufficient supervisory mechanisms and a sustainable and more integrated fiscal framework (with enhanced economic governance, fiscal discipline and a strict compliance with the stability and growth pact).

Reinforcing the economic union for more jobs

The goals of a stronger economic union should be sustainable economic growth, more jobs and greater social cohesion. Completing the internal market is key, as is implementing existing internal market law. An active labour market policy should be developed in all Member States. Thyssen also wants to see a 'social pact' included in the EMU overhaul and is asking for a mid-term review of the Europe 2020 Strategy.

A democratic political union closer to its citizens

Stronger mechanisms for a more democratically accountable decision-making process are needed. This is the only way to close the gap between the European institutions and European citizens. The European Parliament is putting forward several measures, such as the participation of the EP President in Council meetings, the democratic control by the EP of all operations carried out via the emergency funds and the direct financing of the EU via a system of own resources.

Also, the Commission representatives in the Troika should be heard in the EP prior to taking up their duties and should report regularly to MEPs.

Finally and importantly, Thyssen underlines that instruments that are currently intergovernmental should be enshrined in European Treaties in order to guarantee legal certainty and democratic legitimacy.

Next steps

Marianne Thyssen's report will be adopted in plenary on Tuesday 20 November. The debate will be livestreamed on the Parliament's website.