European authorities have unveiled their vision for the future, which gives them much greater powers.
It includes the creation of a European treasury, which would have powers over national budgets.
European Commission President Jose Manuel Barroso said it was “a defining moment for European integration”.
Described as a 10-year plan, it is designed to strengthen the eurozone and prevent future crises, as countries grapple with current debt problems.
This week, some markets fell sharply on fears that leaders at this week’s EU summit would fail to agree short-term measures to try to stem the current crisis.
The governor of the Bank of England, Sir Mervyn King, expressed concern about the recent response of European authorities.
“I am pessimistic. I am particularly concerned because over two years now we have seen the situation in the euro area get worse and the problem being pushed down the road,” he said, while appearing at a parliamentary hearing.
The latest document, titled Towards a Genuine Economic and Monetary Union, was released by European Council President Herman Van Rompuy and was drawn up with the presidents of the European Commission, the Eurogroup and the European Central Bank.
Eurogroup president Mr Van Rompuy said it was “not meant to be a final blueprint”, but that he expected “to reach a common understanding amongst us on the way forward” at the EU summit on Thursday and Friday.
‘Responsibility’
The document said greater fiscal union could lead to common debt being issued by eurozone countries.
This approach could overcome German resistance to the issue of eurobonds, which help weaker countries to borrow more cheaply but require stronger countries to take on the risk.
There would also be banking union, with a single European banking regulator and a unified deposit guarantee scheme.
Mr Barroso said the guiding principle was that “greater solidarity and greater responsibility must go hand in hand”.
Proposals in the report included:
- Limits on the amount of debt individual countries can take on
- Annual national budgets can be vetoed if they are likely to mean a country exceeding its debt limits
- The eurozone borrowing money collectively “could be explored”
- A European treasury office to be set up to control a central budget and keep an eye on national ones
- A single European banking regulator and a common scheme guaranteeing bank deposits
- Common policies on employment regulations and levels of taxation
- Joint decision-making with national parliaments to give it “democratic legitimacy”
Earlier, German Finance Minister Wolfgang Schaeuble also called for there to be a European finance minister, with the power to veto national budgets as well as an elected president of Europe.
One of the big changes under the new proposals is that while in the past eurozone members had to keep their budget deficits below a certain level, a European treasury would be able to force them to make changes to their budgets to keep their deficits down.
The measures advocated by the four main European authorities would need treaty changes and approval by national parliaments.
French Finance Minister Pierre Moscovici has said leaders at this week’s summit should, “lay the groundwork for the second phase of the euro”.
However, as BBC Europe editor Gavin Hewitt points out, the area’s two biggest economies “are on different pages”.
“It has generally been true that the European project has been driven forward when France and Germany are in step.
“They are not at the moment. There is a deep philosophical and political divide between them,” our correspondent says.
BBC has the full article
