THE STATE OF THE EUROPEAN UNION. Europe at the political crossroads

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THE STATE OF THE EUROPEAN UNION
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manage its destiny through good and bad times
and must remain the ultimate goal for EMU
completion. However, this is a far reaching
change and would require a major break-
through in EMU- specific political integration.
To some extent, investment needs will now
be better addressed across the EU as a whole
through the European Fund for Strategic
Investment and thanks to a more flexible and
investment-friendly use of the fiscal rules.
However, beyond the medium-term, a proper
EMU investment facility could be developed as
part of a proper Eurozone fiscal capacity, fi-
nanced by own resources and borrowing.
Symmetric shock management, as long as
not supported through a common budgetary
capacity, can at least be improved in future
through closer economic coordination built on
a truly common economic policy strategy and,
again, on a more flexible and counter- cyclical
use of the fiscal rules.
Growing divergences among Eurozone mem-
bers have a destabilising effect on the zone as
such and members of the EMU cannot use the
exchange rate as an adjustment mechanism. The
promotion of structural convergence beyond
what the EU budget already provides through its
Structural and Cohesion Funds should be com-
plemented by a fiscal instrument to address
asymmetric shocks and on a social investment
scheme to support structural convergence and
implementation of progressive reforms. Both in-
struments should be subject to strong democrat-
ic oversight by the European Parliament.
In December 2015, a High-Level Working
Group on the deepening of Economic and
Monetary Union1 has been established by the
1Cf.:
sustainable_social_and_democratic_economic_and_mon
etary_union
Party of European Socialists, exploring inter alia
several options for an EMU fiscal capacity.
In the European Parliament, joint work has
been launched by the ECON and BUDG com-
mittees on a report on a Eurozone budgetary
capacity (rapporteurs P. Berès and R. Böge). Two
working documents2 have been elaborated so
far and an expert hearing has taken place.
A fiscal instrument to address asymmetric
shocks
A countercyclical instrument, the importance of
which was already clearly underlined in the
Four Presidents’ final report back in December
2012, would protect EMU Member States in
worst-case scenarios and would provide imme-
diate stability and confidence. It may take dif-
ferent forms enabling to partly insure partici-
pating countries against asymmetric shocks,
without generating permanent fiscal transfers.
Possible schemes of EMU Economic Insurance
could provide either general or targeted budg-
etary support in cyclical downturns, for instance
in order to maintain public investment levels in
key areas. A relevant proposal favours a system
of partial complements to national unemploy-
ment benefit systems in times of economic
downturn (EMU Unemployment Insurance
Scheme) as a way to avoid a pro-cyclical fiscal
stance in the Member State(s) concerned during
a certain time period.
Since autumn 2015, European unemploy-
ment insurance3 as a suitable form of an EMU
2Cf.:
budg/working-documents.html?ufolderComCode=CJ16&u
folderLegId=8&ufolderId=05365&linkedDocument=true&u
refProcYear=&urefProcNum=&urefProcCode=
3Cf.:
note_unemployment_insurance_2015_5OCT.pdf