EN Official Journal of the European Union C 332/8

Opinion of the European Economic and Social Committee on Completing EMU: The political pillar

(own-initiative opinion)

(2015/C 332/02)

Rapporteurs: Mr Carmelo CEDRONE and Mr Joost VAN IERSEL

On 22 January 2015 the European Economic and Social Committee, acting under Rule 29(2) of its Rules of Procedure, decided to draw up an own-initiative opinion on:

Completing EMU: The political pillar.

The Section for Economic and Monetary Union and Economic and Social Cohesion, which was responsible for preparing the Committee’s work on the subject, adopted its opinion on 6 May 2015.

At its 508th plenary session, held on 27 and 28 May 2015 (meeting of 27 May 2015), the European Economic and Social Committee adopted the following opinion by 183 votes to 16, with 16 abstentions.

Preamble

With a view to the next term of office of the European Parliament and the European Commission, the EESC adopted an opinion in July 2014 on ‘Completing EMU — the next European legislature’. In November 2014 an update by the rapporteurs was issued. The goal was to formulate a coherent set of policies to strengthen the architecture and effectiveness of EMU.

The EESC distinguishes four pillars: a monetary and financial pillar, a macro and microeconomic pillar, a social pillar, and a political pillar. All four are interrelated. With regard to the monetary and financial, the economic, and the social pillars, the EESC has adopted a number of opinions. Now the EESC more specifically examines issues related to the overarching political and institutional dimension of EMU that is entirely in the hands of the Member States and the European Council. This dimension begins with a core group of EMU countries, but is also open to other potential candidate euro countries that wish to go down the same road.

1. Conclusions and recommendations

1.1. Following 6 years of financial and economic crisis it looks more difficult than ever to predict the economic and social future. Given the geopolitical and economic challenges, only a solid EMU will ensure future-oriented stability.

1.2. The EMU still remains fragile — see hereafter the diagnosis and the SWOT analysis. The EESC is of the opinion that persisting imbalances as well as creation of trust and confidence across Europe require more effective and democratic economic governance, notably in the euro area.

1.3. The EESC realises that decisive steps cannot be taken overnight, but two elements have to be duly taken into account: (a) Europe cannot afford to put decisions off for years; and (b) a first prerequisite is an agreement across the euro area about the principles of necessary economic policies to be carried out by effective governance.

1.4. In parallel to economic convergence, democratic legitimacy, a solid political framework, and a shared sense of common destiny are needed. To that end concrete steps can be undertaken within the framework of the current Treaty and rules. In the medium-long term a revision of the Treaty should bring the institutional provisions in line with the indispensable requirements of a real economic and political Union.

1.5. We need a coherent system of the European Council, national governments, the European Parliament, national parliaments and the European Commission that reflects democratic legitimacy, accountability and transparency, and that is able to act effectively in the interest of citizens and economic actors.

1.6. It has become clear that the current system of rules underpinning the EU, and particularly the euro area, has created confusion on the legal, institutional and democratic fronts. A new approach is therefore needed. Given the political and economic dynamic, the EU can no longer maintain its current institutional architecture. For this reason, the Committee deems it essential to deepen the process of integrating the euro area.

1.7. With this in mind, the Committee would like to present a roadmap comprising the following steps: 1.7.1. 1st step 1. stable Eurogroup president; 2. making the Interparliamentary Conference operational; 3. ‘parliamentarisation’ of the euro area (EP Grand Committee with all members from EMU countries). 1.7.2. 2nd step 4. EMU Legislative Affairs Council; 5. voting by euro area parliamentarians on matters of EMU competence; 6. an EMU executive (government) (currently Eurogroup and Commission); 7. strengthening the powers and remit of the Interparliamentary Conference (EP and national parliaments). 1.7.3. 3rd step 8. strengthening the powers of the EP with regard to EMU (democratic legitimacy) and the creation of real European political parties; 9. Chamber of the States (EMU) (governments); 10. separation between legislative and executive powers; 11. abolition of unanimous voting. 1.8. In addition, the following initiatives should be taken to prepare for and implement the steps set out above: — civil society conference jointly organised by the EESC/CoR and the EU presidency and the Commission; — interparliamentary conference; — EP proposals for action without Treaty change and for a revision of the Lisbon Treaty; — constitutional convention; — potential evaluation of option of pan-European referendum.

2. Diagnosis

2.1. The EMU already has an extensive ‘acquis’. It has a shared currency and a central bank; to a certain extent, it ensures coordination of fiscal and economic policies; it issues binding decisions on countries, which, in principle, limits their economic and fiscal autonomy, imposes conditions on any expansionary measure in the Member States, and obliges them to undertake economic and social reforms.

2.2. This means that EMU is a federation ‘in itinere’ that for the moment acts as a ‘guardian’, but does not yet act jointly. Its sense of purpose is stronger than elsewhere and has fostered a ‘public area’ of debate. EMU involves a greater ceding of sovereignty on the part of the Member States, although its management remains primarily under the control of a technocratic structure.

2.3. This Union needs to be completed by creating the necessary conditions to ensure that countries that are part of it, or that wish to enter, can achieve not only stability, but also development and prosperity. It ought to be more advantageous for them to join the euro area than to stay out.

2.4. The outbreak of the financial crisis in 2008 and its subsequent developments, together with the disastrous consequences for the real economy and European society, have provided a wake-up call for all those who believed up to that point that the architecture of EMU would continue to function more or less satisfactorily and that spill-over effects would harmoniously promote convergence between the Member States.

2.5. Soon after the initial shocks, the European institutions began to find short-term solutions for the most urgent problems. The fact that mechanisms were installed to keep the EMU, the euro and the euro area intact has been a great achievement, while there were also delays and serious omissions, such as the lack of a common plan to foster growth and employment.

2.6. It is also a great achievement that, under extremely difficult circumstances, productive steps forward have been made — at least partially — to establish firmer ground for the EMU. The EESC welcomed each of these steps, but also criticised their limitations and presented other ideas more suited to tackling the crisis.

2.7. The financial and economic crisis turned into a continuing economic downturn with striking economic imbalances between national economies. Large parts of the EU are in a far from enviable situation of low growth and faltering employment 6 years later. The economic and social consequences speak for themselves.

2.8. Notwithstanding all progress the EMU remains incomplete. The situation is very complex. Despite hopeful signs of recovery, economic stagnation and lack of jobs creation and poverty are prevailing in a number of countries, most of which is due to various deep-seated causes that have become more visible and accentuated during the crisis: history, traditions in governance (or the lack of it), diverging growth paths, different economic and social structures and different external policies.

2.9. In the euro area a discord persists between protagonists of a stability union, driven by economic convergence and reforms in Member States, and protagonists of a straightaway fiscal union. This discord also leads to diverging views on which economic policies should be leading at national and EU level, both in politics and between social partners.

2.10. Divergent views and practices have exacerbated a climate of distrust not only politically, but also among the general public in the various countries, however superficial mutual criticism may be. This development has become a self-fulfilling prophecy — it strips away potential manoeuvring room from policy-makers, and causes waves of EU-phobia among citizens.

2.11. With the EMU primarily dominated by intergovernmental decision-making and technocratic management, lack of democratic legitimacy and credibility has a serious impact that also heightens contrasts between the partner countries.

2.12. The EU is not an exception. Other large entities such as the US, China, Russia, India, and Brazil and a large number of smaller countries, also suffer from comparable difficult circumstances. But undeniably, the EU, and notably the euro area, has great trouble in overcoming obstacles in comparison to the US and the Asian continent (‘the Asian factory’).

2.13. As a matter of principle the EESC believes that, although many different and intricate aspects shape the actual state of the European economy, more effective political management of the EMU should help significantly to create more stability in addressing current and future difficulties. In any event, a stronger EMU will be indispensable for safeguarding certain European key interests in the world.

2.14. The EESC realises that definitive solutions are not within reach at the moment. It also realises that current dynamics, complexities and dilemmas are obstacles to a robust roadmap. On the other hand, current institutional and governance shortcomings cannot continue for another long period of time without lasting damaging effects to confidence and economic output. The EESC thus considers unacceptable delays, resignation and the absence of a plan for the future.

2.15. Therefore the EESC believes that a serious debate on a well-founded architecture of the EMU, implying a consensus concerning economic and social objectives as well as agreed governance, is unavoidable.

2.16. Since the inception of the EMU the debate on more or less European integration is about national sovereignty. The EESC underlines that this is a false paradigm, as national sovereignty is gradually fading away. In the current paradigm of globalisation and corresponding challenges it sees no feasible alternative to better anchoring of common or pooled sovereignty in the EU, and notably in the euro area. This will require solidly pooled economic governance or an economic government. In the same vein, the future of the EMU is thus closely related to other vital ‘sovereign’ policies such as the development of the Common Security and Defence policy and of an Energy Union.

3. SWOT analysis of the current situation in EU and euro area

Strengths Weaknesses — Increased awareness that Europeans are facing a common future together — Outstanding, though restricted, role of the ECB (as supranational institution) — The ESM and recent acknowledgement of flexibility rules — Improved budgetary discipline by the Member States — Increasing political acceptance by governments of the agreed rules at EU-level, notably concerning the need of structural reforms in all Member States — Increasing EU focus on improvement of governance and better administration in all Member States — The start of the Banking Union, and the decision-making process on the Single Resolution Mechanism — Quantitative easing by the ECB — More active, but still limited, role of the EIB and the proposed Investment Plan for Europe — The Semester and country-specific recommendations, implying a greater involvement of the EU in identifying weak spots in national budgets and governance — More transparency in the public debate on developments in the partner countries — Increased acceptance in all Member States of the need to promote growth and competitiveness as well as to improve conditions for internal and foreign investment — Despite differences across the continent, European social market models are ensuring best stable developments in society. — Lasting economic imbalances in the euro area which is tending to increase — Lack of solidarity among — and within — Member States — Persistent unanimity voting on essential matters — Very lengthy discussions needed to make progress, even on issues that are already agreed upon — Despite the euro there is no ‘community of destiny’ while economic and fiscal policies remain, to a large extent, within the Member States’ remit (1) — Lack of democratic legitimacy — Weak position of the EC in implementing European rules and the Semester — Weak implementation of agreed rules in Member States: excessive deficits, country-specific recommendations — Negative effects of exclusive austerity policies — Historically-based national prejudices also leading to continuing suspicion between Member States — to a lesser degree between the Ministries of Finance — Low level of inclusion of national parliaments and civil society in the decision-making process and/or awareness-building in most Member States — Unsatisfactory communication, notably by the leadership in Member States — Discord in public opinion and political parties across Europe and in the euro area — Focus on resolving short-term approaches, no long-term view, let alone engagement — Incomplete Banking Union, no decision as yet about deposit framework — A deep pan-European capital market is a distant dream for as long as banks remain nationally-based — Incomplete and fragmented internal market — Lack of a long-term political vision for the future of EMU/EU. Opportunities Threats — Strengthening of the governance of the euro area — Strengthening democratic legitimacy — Correct implementation of the agreed rules — Confidence building measures leading to a stable investment climate — Attracting investments within the EU and from abroad, also through the Investment Plan for Europe — Success of the ECB’s QE programme — Convergence of budgetary and fiscal policies, based on agreed principles: continuing national policies within an accepted common framework — Contractual arrangements between the Member States and the EU — Tackling economic imbalances in a common framework — Agreement on national reforms as well as on growth and job-creation initiatives — A tenable solution for Greek — and others — worries in promoting convergence — Keeping Britain in on reasonable grounds which do not compromise progress been made by others — A successful interaction between the ECB, the EC and the Council, particularly in the euro area — A solid governance of the euro area — Acknowledgment of a pro-active role for the Commission, including a firm application of the ‘community method’ — Completing the Banking Union and a pan-European capital market — Establishment of conditions to introduce Eurobonds for investments — A common base corporation tax — Planning a tax basis for the EU budget, and extending it in parallel — A single European voice in international forums. — EU/euro area: too little, too late — Negative public feeling/euroscepticism — Lack of confidence among investors, internally and abroad — Deflation — Continuing low growth, compared to major global competitors — On-going international (military) conflicts, notably on the EU’s doorstep — Insufficient preparation in the event of a new economic crisis — Increasing economic heterogeneity within the Union/euro area — Grexit (or something approaching it) — Brexit (or a stagnating status quo in the UK—euro area balance) — Stagnation of the Banking Union — Continuing link between national banks and Member States, lack of a pan-European capital market — Failing implementation in the financial sector — Failing implementation in the Internal market at large, resulting in growing fragmentation — Stagnating progress in other key areas, such as an Energy Union, a Digital Union and CSDP — Lack of success of the ECB’s QE programme.

4. Proposals regarding EMU policies and the EU institutions

4.1. Democracy, transparency and legitimacy

4.1.1. The fundamental challenges of economic and monetary union, involving a substantial transfer of national powers to the EU, are linked to its democratic dimension and in particular its parliamentary dimension, to the effectiveness of its decision-making system, to compliance with the principles of accountability and sincere cooperation, and to the transparency (visibility) of its way of working. In the EESC’s view, these challenges require a political union that restores and ensures public participation and the involvement of all stakeholders in European integration.

4.1.2. Achieving political union is a process that should take place in stages. Certain conditions and measures could be put in place without the need for Treaty change. There are others that necessarily require a revision of the Treaties.

4.1.3. The EESC recommends that, for reasons of accountability and cooperation, the means of participation that exist at national level, be duly applied also at EU level, including: — fully fledged European political parties; — the creation of political majorities and minorities on the basis of electoral programmes; — harmonising the dates of European elections.

4.1.4. In each State and across the EU, the issue of democracy constitutes a serious weakness (we need only consider the role of the Troika in the new system of economic governance). The relationship between representatives and those they represent continues to evaporate: a reality that has been highlighted by the crisis. Hence the urgent need to address this issue as part of the process of completing economic and monetary union across its four means or pillars of integration: banking union, fiscal union, economic union (which, in the Committee’s view, should include social union) and, finally, political union.

4.1.5. In order to achieve that political union, starting with the countries that want it and applying the principle of differentiated integration, the EESC would suggest, in due course, taking the approach of the Convention, which would be tasked with finding solutions beyond the Lisbon Treaty. The EESC will undertake to draw up proposals for the effective participation of civil society in the work of such a Convention.

4.2. The legislative branch:

Representative democracy: the European Parliament and national parliaments

4.2.1. The primary arena for representative democracy within economic and monetary union is the European Parliament, which includes members from the countries that have joined the single currency or are preparing to do so.

Proposal A

To ensure the profile, consistency and effectiveness of the work of those MEPs, the EESC suggests creating a permanent body within the EP that would bring them together. Its purposes would be to underpin the accountability of the single currency’s governance institutions and, at the same time, establish a public space for dialogue and consultation, drafting and voting on texts on economic and monetary matters to be submitted to the Assembly for decision and ensuring that the principles of solidarity and sincere cooperation are equally taken into account in implementing EMU policies.

4.2.2. The consolidation of representative democracy within EMU would not be complete if the method of decision-making were not to take account of the dual legitimacy — national and European — that is essential in the sui generis system that is the European model.

Proposal B

The EESC suggests harnessing and simultaneously expanding the remit of the Interparliamentary Conference (Article 13 of the Fiscal Compact), giving it the powers to discuss and issue binding opinions on growth, competitiveness, employment, tax and social policy. In addition, the European Parliament should open up its internal body on EMU to the involvement of national MPs from the ‘in’ and ‘pre-in’ countries of the euro area, as observers. The Interparliamentary Conference could be made up of the chairs of the budget and industry committees of the EMU countries and of the chairs of the EP committees on budgets; economic and monetary affairs; industry, research, and energy; and cohesion. Deepening the co-decision procedure must sustain the legitimacy of new legislative proposals.

Proposal C

For their part, national parliaments should be seen to engage in EU policy debates. This is already underway in some countries, for instance through the Commission’s participation in parliamentary debates. Good practices here could be disseminated. The aim would be that national political players would engage more visibly at their level in EU policies that affect them directly.

The Council

4.2.3. In this political context, there will be a more favourable basis for closer cooperation and consultation between the Eurosummit and/or the Eurogroup — and, in this case, also the ‘pre-in’ countries — the EP and national parliaments. In line with the logic of the previous point, the ministers from the euro area countries and from those countries seeking to join the euro area could exercise legislative functions jointly with the EP, on matters relating to EMU.

4.2.4. The Council action should be enhanced through the efforts of national administrations which must go hand-in-hand with this development, notably through the exchange of officials between them and by stepping up bilateral relations.

4.2.5. The Committee points out that expanding qualified majority voting and, in time, abolishing unanimous voting, will facilitate the deepening of integration within political union.

4.2.6. Thus, better structured cooperation and consultation within political union will enhance the effectiveness of policies in the key areas of EMU. The EU as a whole will duly benefit from this.

4.2.7. As set out in the table in point 5, there are many things that could be done without Treaty change. For the majority of EMU policies, enhanced cooperation could operate directly between the countries; it would be better to assign to EMU a kind of permanent enhanced cooperation that would also enable action to be taken, more effectively, by the MEPs from the euro area countries and euro area candidate countries.

4.2.8. The Committee suggests that it would be useful to revive the ‘Jumbo’ Councils within the Eurogroup, thereby opening up the possibility of regular dialogue between the finance, economy and social affairs ministers on the one side and the social partners and civil society on the other.

4.3. The executive branch

An executive for EMU, the Commission

4.3.1. After a transitional period, leading eventually to a Treaty change, an EMU governing body will take shape. Its president should to all intents and purposes operate as minister for the economy and finance for the euro area, with a role as vice-president of the Commission — similar to the position of the High Representative for Foreign Affairs and Security Policy.

4.3.2. In the European model sui generis the European Commission (smaller and effective) will continue to play an essential role. The ‘community method’ and the current right of initiative of the EC also have a very special significance in deepening the EMU. This role should be assured in the political Union.

4.3.3. The European Commission should maintain a ‘dual’ role, liaising between the EU and EMU until such time as an EMU Executive has been set up in its own right. Without prejudice to the current right of initiative of the EC, ways and means should be found to duly involve the EP in the process, in order to sustain the legitimacy of new legislative proposal.

4.3.4. The EESC proposes appointing a permanent Eurogroup president, who could work best, directly in Brussels, with the Commission, EP, and national governments and parliaments. Following the method used by the Commission president Mr Juncker, a Commission vice-president could chair the Eurogroup meetings. He/she could thus represent EMU in international bodies.

4.4. The EESC

4.4.1. All this should make us more determined than ever to build up stronger, more constructive relations with the people of Europe and find ways of involving them in public life. Solid forms of consultation on specific matters involving social partners and civil society should be guaranteed, notably in the euro area, as these organisations play an important role in policy areas that are directly affected by EMU. They often also affect the outcome of policies at national level. At European level, the EESC can act as a civil society facilitator, responsible for organised civil society’s participation in the EU decision-making process, without any prejudice to the role of the social partners in the social dialogue, through: (a) a forum of organised civil society on specific issues, including that for assessing the limits to the process of European integration and searching for new forms of participation; (b) a specific forum for the euro area to assess the sense of purpose and feeling of belonging, as a means of overcoming prejudices and increasing mutual trust; (c) opinions in the form of pre-legislative initiatives on certain issues of particular sensitivity for the public, and on which the EP and the Council are required to legislate.

5. Legal instruments and subject matters

5.1. To achieve the four unions, in line with the report of the four presidents, and equivalent to the EESC’s four pillars (2), measures or policies in a range of areas could be carried out without Treaty change (1st column in the table below). Others would have to be decided on together at EU level (euro area), using a new decision-making method and new instruments, and using the enhanced cooperation provided for in the current Treaty (second column of the table) or by means of amendments to the Treaty or, if necessary, a new EMU Treaty (third column). Finally, the table summarises these stages and puts forward institutional proposals and preparatory initiatives regarding the political pillar of EMU (fourth column).

5.2. Analytical framework of options for completing EMU (3)

(I) Policies under the existing Treaty (II) Enhanced/ structured cooperation passerelle clauses (Article 136 TFEU) (III) Beyond the Lisbon Treaty Institutional steps for achieving the political pillar: for the euro area and the countries that want it Financial, fiscal and monetary pillar — Taxation with a common consolidated corporate tax base (CCCTB) — Completion of Banking Union, capital market, European surveillance — Financial assistance for a Member State in the event of crisis (Article 122 TFEU) — Implementation of national reform programmes Financial, fiscal and monetary pillar — Strengthening of the ESM — Completing the ECB’s mandate — EMU common fiscal policy — Fiscal and Budget Union — Debt mutualisation (or with Article 125 TFEU?) — Solidarity and competitiveness mechanism to counter asymmetric shocks and imbalances (fiscal Union) — EMU balance of payments Financial, fiscal and monetary pillar — Own resources — Establishment of an European Monetary Fund as debt agency — Eurobonds for new debt — Fiscal harmonisation 1st step 1. Stable Eurogroup president 2. Making the Interparliamentary Conference operational 3. ‘Parliamentarisation’ of the euro area (EP Grand Committee with all members from EMU countries) Economic pillar — Strengthening and implementation of the Juncker plan — Policies for investment, growth and employment — EIB Eurobonds — Strategies to disseminate knowledge (Digital Agenda) — Completion of the internal market (single energy/digital/research market) — Flexibility in Stability and Growth Pact rules — Improved implementation of European Semester and contractual agreements (CCI) Economic pillar — EMU macro- and microeconomic government — Research and innovation — Close coordination of meetings at the Summits of Heads of State and Government of the euro area, Eurogroup and Euro Working Group — New legislation for the euro area — Investment in social infrastructure — Participatory democracy in the economic sector Economic pillar (in the event that EMU enhanced cooperation is not authorised) — EU high representative for economic/fiscal policy — Mandatory coordination of economic policies (amending Article 5 TFEU) — Majority voting on macro- and microeconomic policy in co-decision with the Parliament (EMU parliament representatives) — Transferring competences, starting with industry and energy 2nd step 4. EMU Legislative Affairs Council 5. Voting by euro area parliament representatives on matters of EMU competence 6. An EMU executive (government) (currently Eurogroup and Commission) 7. Strengthening the powers and remit of the Interparliamentary Conference (EP and national parliaments) Social and rights pillar — Accession to the European Convention on Human Rights — Training and education — Framework directive on services of general interest — Gender mainstreaming — Development indicators — Accession to the Council of Europe’s Social Charter — Respect for ‘rights’ standards — Horizontal social clause (Article 9 TFEU) Social pillar — Social policy coordination — Harmonisation of social protection systems — Immigration policy — Individual and transnational pension right — Minimum income for citizens — European public goods — Employment support — Labour market, mobility, recognition of qualifications — Quality of public services Social pillar — Majority voting for social, employment, education and health policy — Amendment of the Charter of Rights regarding limits on property rights — Transfer of a number of areas from support to shared competence (education and training in particular) 3rd step 8. Strengthening the powers of the EP with regard to EMU (democratic legitimacy) and the creation of real European political parties 9. Chamber of the States (EMU) (governments) 10. Separation between legislative and executive powers 11. Abolition of unanimous voting Political pillar — EMU parliamentarisation — Grand Committee (GC) (euro area parliament representatives) — Stable Eurogroup president — Legislative Affairs Council — Interinstitutional agreements — Neighbourhood policy implementation — Bilateral and multilateral EU trade agreements Political pillar — Voting by EMU parliament representatives on matters of EMU competence — Strengthening of the Interparliamentary Conference (Article 13 of the Fiscal Compact) — European defence — Foreign policy — One voice at the UN Security Council — EMU external representation — European Public Prosecutor — European Voluntary Humanitarian Aid Corps Political pillar — New EMU Treaty — Euro parliament (EMU parliamentarians) with permanent enhanced cooperation (new Article 136 TFEU) — Strengthening of EP (ordinary legislation, right of initiative where the Commission does not act) — Chamber of the States (national governments +) — Abolition of unanimous voting — Super qualified majority, amendment of the Treaties — European executive (for EMU) — European parties and electoral programmes and transnational lists — Separation of powers — Foreign policy Initiatives — Civil society conference organised by the EESC/CoR in cooperation with the EU presidency and the Commission — Interparliamentary conference — EP proposals for action without Treaty change and for a revision of the Lisbon Treaty — Constitutional convention — Potential evaluation of option of pan-European referendum

Brussels, 27 May 2015. The President of the European Economic and Social Committee Henri MALOSSE

(1) ‘Preparing for next steps on better economic governance in the euro area’ — Analytical note presented by Jean-Claude Juncker on 12.2.2015, p. 1.

(2) Also on the basis of EESC opinion ‘Completing EMU — The next European legislature’ (OJ C 451, 16.12.2014, p. 10).

(3) Idem.