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Adopts the following roadmap: i. General principles The transfer of sovereignty over monetary policy requires alternative adjustment mechanisms such as the implementation of growth-enhancing structural reforms, the single market, the Banking Union, the Capital Markets Union, to create a safer financial sector, and a fiscal capacity to cope with macroeconomic shocks and increase the competitiveness and stability of Member States’ economies, in order to make the euro area an optimal currency area. Convergence, good governance and conditionality enforced through institutions being held democratically accountable at euro-area and/or national level are key, notably in preventing permanent transfers, moral hazard and unsustainable public risk sharing. As the magnitude and credibility of the fiscal capacity increase, it will contribute to restoring the trust of the financial market in the sustainability of public finances in the euro area, making it possible, in principle, to better protect tax payers and reduce public and private risk. The fiscal capacity shall include the European Stability Mechanism (ESM) and a specific additional budgetary capacity for the euro area. The budgetary capacity shall be created in addition to and without any prejudice to the ESM. As a first step, the specific euro-area budgetary capacity should be part of the Union budget, over and above the current ceilings of the multiannual financial framework, and should be financed by euro-area and other participating members via a source of revenue to be agreed between participating Member States and considered to be assigned revenue and guarantees; once in a steady state, the fiscal capacity could be financed through own resources, following the recommendations of the Monti report on the future financing of the EU. The ESM, while fulfilling its ongoing tasks, should be further developed and turned into a European Monetary Fund (EMF) with adequate lending and borrowing capacities and a clearly defined mandate, to absorb asymmetric and symmetric shocks. ii. Three pillars of the fiscal capacity for convergence and stabilisation of the euro area The fiscal capacity should fulfil three different functions: — first, economic and social convergence within the euro area should be incentivised to foster structural reforms, modernise economies and improve the competitiveness of each Member State and the resilience of the euro area, thereby also contributing to Member States’ capacity to absorb asymmetric and symmetric shocks; — second, differences in the business cycles of euro-area Member States stemming from structural differences or a general economic vulnerability create a need to address asymmetric shocks (situations whereby an economic event affects one economy more than another, for instance when demand collapses in one specific Member State and not in the others following an external shock beyond the influence of a Member State); — third, symmetric shocks (situations whereby an economic event affects all the economies in the same way, for example variation in oil prices for euro-area countries) should be addressed to increase the resilience of the euro area as a whole. In view of these objectives, it will be necessary to consider which functions can be achieved within the existing legal framework of the Union and which will require Treaty adjustment or change. Pillar 1: the convergence code The current economic situation requires an investment strategy in parallel to fiscal consolidation and responsibility through compliance with the economic governance framework. Beside the Stability and Growth Pact, the convergence code, adopted under the ordinary legislative procedure and taking into account the country-specific recommendations, should focus for a five-year period on convergence criteria regarding taxation, labour market, investment, productivity, social cohesion, and public administrative and good governance capacities within the existing Treaties. Within the economic governance framework, compliance with the convergence code should be a condition for full participation in the fiscal capacity, and each Member State should come forward with proposals on how to reach the criteria of the convergence code. A euro-area fiscal capacity should be complemented by a long-term strategy for debt sustainability and debt reduction and enhancing growth and investment in euro-area countries, which would bring down overall refinancing costs and debt/GDP ratios. Pillar 2: absorption of asymmetric shocks Given the strong integration of the euro-area Member States, asymmetric shocks with an impact on the stability of the euro area as a whole cannot be ruled out completely, despite all efforts on Member-State policy coordination, convergence and sustainable structural reforms. Stabilisation provided through the ESM/EMF should be complemented by automatic shock absorption mechanisms. Stabilisation must incentivise good practices and avoid moral hazard. Such a system must include clear rules on timeframe-possible payments and repayments, and must clearly be defined in terms of size and funding mechanisms, while being budgetary neutral over a longer cycle. Pillar 3: absorption of symmetric shocks Future symmetric shocks could destabilise the euro area as a whole since the currency area is not yet endowed with the instruments necessary to cope with another crisis of the same extent as the previous one. In the case of symmetric shocks brought about by a lack of internal demand, monetary policy alone cannot reignite growth, particularly in a context of zero lower bound. The euro-area budget should be of sufficient size to address these symmetric shocks by funding investment aimed at aggregating demand and full employment in line with Article 3 TEU. iii. Governance, democratic accountability and control The Community method should prevail in economic governance for the euro area. The European Parliament and national parliaments should exercise a strengthened role in the renewed economic governance framework in order to reinforce democratic accountability. This includes increased national ownership on the European semester and a reform of the interparliamentary conference provided for in Article 13 of the Fiscal Compact to give it more substance, in order to develop a stronger parliamentary and public opinion. To improve ownership, national parliaments should scrutinise national governments, just as the European Parliament should scrutinise the European executives. The positions of President of the Eurogroup and Commissioner for Economic and Financial Affairs could be merged, and in such case the President of the Commission should appoint this Commissioner as Vice-President of the Commission. A finance minister and treasury within the Commission should be fully democratically accountable and equipped with all necessary means and capacities to apply and enforce the existing economic governance framework and to optimise the development of the euro area in cooperation with the ministers of finance of the euro-area Member States. The European Parliament should review its rules and organisation to ensure the full democratic accountability of the fiscal capacity to MEPs from participating Member States;