[LONDON] The European Union needs better tools to safeguard the euro area from national policies that threaten its well-being, according to a paper by European Commission President Jean-Claude Juncker and European Central Bank President Mario Draghi.
"What instruments are needed in situations in which national policies continue -- despite surveillance under the governance framework -- to go harmfully astray?" said the paper, presented at a summit of in Brussels.
Capital markets union would help the EU make its 19-nation monetary union more resilient against shocks "by providing an element of private risk-sharing," according to the paper. The EU also should consider how financial-market risk sharing could "be enhanced to ensure a better absorption of asymmetric shocks." Euro-area nations have grappled with the financial crisis since 2007, while the region's troubles have shifted from the banking sector to sovereign bonds and rising debt. Greece, Portugal, Ireland, Cyprus and Spain all received bailouts from the bloc's newly created firewall funds, and EU nations are still wrestling with how to apply tough new fiscal rules.
The report, like a previous version from 2012, asks the EU to consider how much the euro area can rely on rules and how much it needs "strong, common institutions" to provide oversight. It also asks for ways to provide "accountability and legitimacy" for European monetary union, given its many levels.
"The euro is more than a currency. It is also a political project," according to the report. "This requires both solidarity in times of crisis and respect by all for commonly agreed rules." The paper was also signed by European Union President Donald Tusk and Dutch Finance Minister Jeroen Dijsselbloem, who leads the euro-area finance ministers' group. It is available online on the European Commission's website.