In a bid to stem the tide of the debt crisis engulfing the eurozone, the twin leaders of the European Union, Herman van Rompuy and Jose Manuel Barroso, have announced plans for further integration.
“We are now facing a truly systemic crisis. It has made it clear that we must progress with greater integration of economic governance, especially within the euro area” Barroso, President of the European Commission, told the European Parliament on Wednesday (16 November).
He said he would present plans next week “for the joint issuance of bonds in the euro area”. “I believe that Euro stability bonds will be seen as natural when we achieve our goal of reinforced governance and of course discipline and convergence,” he said.
EU Council President Van Rompuy, meanwhile, told parliament that the current crisis leaves the members of the eurozone with no choice.
“The crisis in the euro area does require us to do more. We need to acknowledge that this means a sharing of sovereignty for all members of the euro zone, and not only a loss for the countries in difficulty,” he said.
He also said that euro zone governments should look at strengthening the role of automatic sanctions for countries that break fiscal rules, “such as a suspension of voting rights or the suspension of structural funds or other payments.”
Also, he asked out loud, “should we provide power for a central authority to intervene in national budgetary procedures?”
He said he would present an interim report next month with “a roadmap on how to proceed”. A finalised report will then be presented in May or June next year.
He further dismissed worries, voiced most loudly by the UK but echoed by those outside the eurozone, that closer integration within would cause a two-tier Europe.
“There has been much exaggerated talk about this,” he said. “It is time to de-dramatize this debate. After all, it is perfectly natural that those who share a common currency take some decisions together.”
“It is in the interest of the non eurozone EU members that its financial stability is organized and secured. A better structured euro area is in everybody’s interest,” he added.
For Guy Verhofstadt, leader of the liberal group in parliament and longtime advocate of joint eurobonds, the proposals did not go far enough.
“The euro zone crisis has reached a very dangerous point. We are now witnessing increasing spreads on interest rates between national sovereign bonds and the benchmark German bund even for countries with a AAA credit rating. Nothing less than full economic and fiscal union including euro bonds will do,” he said.
Source: EUobserver, OEIC staff