BRUSSELS (Reuters) - The European Commission proposed on Wednesday a package of legislative and non-binding measures to reform the euro zone and make it more resilient to future crises.
Below are the main proposals:
The euro zone bailout fund, the European Stability Mechanism (ESM) should be transformed into a European Monetary Fund (EMF) with more responsibilities.
In addition to providing loans to member states in financial trouble, the EMF would be a backstop for the euro zone’s lender-funded bank resolution fund, the Single Resolution Fund.
To make it more nimble, the EMF would in an emergency be able to take decisions with a majority vote, rather than with unanimity, as is the rule now.
It could also develop new financial instruments that could be used to provide further support to states hit by financial shocks.
A European Minister of Economy and Finance could start working from November 2019 when a new commission will take office.
The minister would be at the same time a vice president of the commission, the chair of the Eurogroup of euro zone finance ministers and would oversee the work of the new European Monetary Fund.
The minister would promote and support the coordination and implementation of reforms in EU countries and “would also be responsible for identifying an appropriate fiscal policy for the euro area as a whole.”
This new instrument would help countries hit by a crisis to maintain the same level of investment as in good times thanks to EU financial support. This could accelerate the recovery of troubled states.
An ailing state could receive “automatic” support with a mix of loans and grants from the EU budget and the EMF.
The financial aid would “be strictly conditional on clear criteria and continuous sound policies, in particular those leading to more convergence within the euro area”.
EU states will be encouraged to carry out structural reforms with funds from the EU budget that could be made available already from next year.
Technical and financial support would be provided to the EU countries that are not members of the 19-state euro zone and which want to join the common currency area.
The intergovernmental Fiscal Compact treaty that has introduced stricter budgetary rules for all EU countries except Croatia, the Czech Republic and Britain which did not sign it, should be incorporated into EU law.
The process is to increase the democratic legitimacy of EU fiscal rules, but faces opposition from countries like Italy that fear the tight provisions of the compact will become permanent. It is also criticised in Germany, where many fear it could lead to a softening of the current fiscal rules.
Reporting by Francesco Guarascio