In the European Economic and Social Committee's (EESC) opinion piece on the European Commission's reflection paper on the deepening of the economic and monetary union, rapporteur David Croughan, an Irish employers’ representative, called for the creation of a framework by 2018 to foster so-called sovereign bond-backed securities (SBBS) as a type of European safe asset.
According to the EESC, the work being done to complete the EU Banking Union needs to be finalised quickly in order to strengthen financial integration and risk sharing through the financial markets. The European Stability Mechanism (ESM) should also assume the role of a European Monetary Fund with its own EU funding instead of deposits and guarantees from the Member States. A European Deposit Insurance Scheme (EDIS) should be introduced ‘without delay’ to ensure that savings in deposit accounts enjoy the same improved protection throughout the EU.
The demand for more macro-economic dialogue is likely to have political consequences. In plain language, this means that the EU Council should be replaced or supplemented by a more ‘democratic system of executive decision-making’. According to the EESC, too much emphasis has been placed on debt reduction through sometimes ‘self-defeating fiscal consolidation’.
Austerity measures and social reality
The paper is in line with what many experts see as the widespread desire in Brussels to be able to reduce budget consolidation at Member State level by simply distributing budget burdens more evenly among Member States. The fact that sovereign debt in many Member States is increasing at the same time as these austerity measures are in place is not mentioned in the paper. It also does not mention the fact that hardly any European countries, other than Germany, have reduced their public debt substantially during the past months. This makes it quite clear to see, which country will be expected to foot the bill for a liability union. Austerity measures, due to the irresponsible mounting of public debt in many Member States, are difficult to reconcile with the proposal to improve social realities through taxation.
Differences in productivity ignored
The way-out, by stimulating direct investments and thus improving local productivity, is traditionally done by devaluating the local currency; however, this is not possible with a single currency. Current differences in productivity are more or less overlooked. There are no attempts to analyse whether or not the accession of some countries to the common currency has been a bad idea and whether refinancing has increased existing public debt.
Social protection based on subsidiarity is at risk
For critics, it stands to reason that the scope for shaping social protection will be quickly reduced in such a deepened monetary union. All the more because a strategy of moving closer together despite the enormous differences in EU social realities will clearly endanger the principle of subsidiarity, even if this is being done to reduce existing differences. In fact, there would hardly be any room left for the German way of doing things. The political consequences would probably be very serious and in no way benefit the EU.