The State of the European Union. The European Parliament faces its most important elections yet

THE STATE OF THE EUROPEAN UNION 76 therefore, be ruled out in the future. And this is why there is a need for further additional meas- ures to ensure that this eventuality does not arise. Progress in eurozone reform Steps prior to 2018: progress in the midst of crisis The need to strengthen the eurozone was iden- tified when the financial crisis was at its height, and the main progress to date consists of meas- ures undertaken to ensure the stability of the monetary area at a time when it was under threat. In particular, there was progress towards banking union, through the creation of European institutions with enhanced supervi- sory and resolution powers. At the same time, a range of regulatory measures were adopted in the financial sphere. In tax affairs, the countries of the eurozone adopted a number of harmonized budgetary procedures, and the tax monitoring and inspec- tion framework was strengthened. Of particular importance was the creation of a permanent European Stability Mechanism (ESM). Its pur- pose was to provide an intra-European solution for countries who found themselves shut out of the financial markets, so that they wouldn’t al- ways have to turn to the International Monetary Fund, thus reducing the likelihood of restricted access to lending causing a country to exit the monetary union. Finally, the most important measures (at least in the short term) to guarantee the stabil- ity of the eurozone were those taken by the ECB. The introduction of outright monetary transactions (OMT) in October 2012, following a speech by the chairman of the ECB, Mario Draghi, in July of that year, in which he prom- ised to do “whatever it takes”, substantially re- duced fears of a possible break-up of the mon- etary area. OMTs were created by the ECB to purchase sovereign debt as part of an operation to rescue a member country. The potentially un- limited purchase of sovereign debt by the cen- tral bank was justified on the grounds that dra- matic differences between public borrowing costs could threaten the transmission of mone- tary policy. In this way, the ECB supported the eurozone and helped reduce the fear that it might disintegrate at the height of the crisis. However, these measures were generally adopted in situations of financial tension and, although they represented a significant change to the architecture of the eurozone, they did not grow out of analysis of the medium-term re- quirements of the single currency. A clear example of how these key decisions were taken outside of the normal channels is provided, precisely, by the path followed by the ECB in creating the OMTs, announced in Draghi’s speech in July 2012, in which, by reaffirming the bank’s commitment to monetary union, he dispelled fears of a possible break-up. Draghi’s announcement was quite unusual. It was not contained in a communiqué following a meet- ing of the ECB’s Governing Council, the body responsible for taking decisions on monetary policy. Instead, the announcement was made in a speech to private investors in London. We don’t know whether the other members of the Governing Council knew about his planned statement in advance, or what view they took of it (and there are contradictory versions of this). However, it seems clear that, at the time of the speech, the ECB’s proposed roadmap was the object of major differences between mem- ber countries, and the measures taken to imple- ment Draghi’s initiative were only approved by