On 31 May 2017 the European Commission launched the reflection paper on the deepening of the economic and monetary union.
In the following recap we will tell you the story of the euro — its strengths and weaknesses, its past and possible future.
Today, the euro is shared by as many as 340 million Europeans in 19 EU countries. And yet it is only 25 years since the Treaty of Maastricht paved the way for the single currency.
“Since its launch, the euro has become the second most used currency around the world.”
Sixty countries and territories, representing another 175 million people, have linked their own currencies — directly or indirectly — to the euro.
The euro has faced some challenges
The economic crisis that started in the United States in 2007–08 led to the worst recession in the European Union’s six-decade history.
Weaknesses remain in the quality of public finances and in the way the euro area is governed.
High levels of public and private debt inherited from the crisis years, as well as large amounts of so-called “non-performing loans” in parts of the banking sector, remain sources of vulnerability.
For the first time since the World War II, there is a real risk that the generation of today’s young adults ends up less well-off than their parents. These developments have fuelled doubts about the design and functioning of the EU’s social market economy.
The euro has also brought opportunities
The euro is neither the origin of nor the only solution for the challenges faced today by Europeans. Yet it creates specific opportunities and responsibilities we must be aware of.
“In a globalised world, the euro provides us with benefits that national currencies and economies alone could never do.”
It protects us from global volatile exchange rates and is a strong player on the global currency markets. The euro oils the engine of the EU internal market. It is the best insurance policy for our savings and pensions against inflation.
Households and businesses have benefitted from low inflation and low interest rates in terms of cheaper credit.
Citizens no longer pay expensive charges to change currencies when crossing internal borders in the euro area. They no longer pay more for transferring or withdrawing money in another euro area country.
“The euro is a success story on many levels but the tough times the euro area has endured over the years mean it is not always perceived as such.”
Discussion on the way forward
15 after the launch of the euro, 10 years after the crisis hit us, it is time to look afresh as to where our Union should be in the next decade.
To guide the work ahead, it is important to first agree on the objective and guiding principles for the way forward.
The functioning and future of the economic and monetary union is a matter of interest for all European citizens from whichever EU country they come from, including those who will join the euro area in the future.
This paper is an invitation for Member States and stakeholders to discuss and agree on which elements they believe will best help our single currency over time.
What is the aim of the discussion on the euro?
The common objective should be the obvious: the euro needs to strengthen its role as a source of shared prosperity, economic and social welfare, based on inclusive and balanced growth and price stability.
“The time has come to complete the journey we started at Maastricht towards a genuine economic and monetary union, with strong institutions and democratic accountability.”
European Commission’s actions towards recovery
The architecture of the euro area is as robust as it has ever been, but there should be no complacency. As this Commission said while taking office, the crisis is not over as long as unemployment remains so high. 15.4 million people are still without a job in the euro area — we must build on the progress already achieved to secure a truly strong and sustainable recovery.
From youth employment to the fight against tax evasion, and most recently with the establishment of a European Pillar of Social Rights, the European Commission is working to ensure economic and social priorities go hand-in-hand.
The Commission proposes to move forward in two steps
The challenge is to take the right steps, collectively.
*The first phase runs to the end of 2019 — This time should be used for completing the banking union and capital markets union with those elements that are already on the table. This includes the financial backstop to the Single Resolution Fund, measures to further reduce risks in the financial sector, and the European Deposit Insurance Scheme.
*The second phase, over 2020–25 would be for completing the EMUarchitecture — It would include more far-reaching measures to complement the financial union, possibly with a European safe asset and a change in the regulatory treatment of sovereign bonds. Additionally, a fiscal stabilisation function could be envisaged. As a result, the institutional architecture could be changed more substantially.
We are diverse but we have a shared goal
Countries of the euro area form a diverse group. There will never be a single approach or a “once and for all” common understanding of how to best advance the economic and monetary union.
The challenge is now to turn ideas into practical solutions and to identify a way forward that is pragmatic and flexible, yet effective for all.
Our shared goal is to strengthen the single currency and tackle issues of common interest which go beyond national borders.
“It is time to put pragmatism over dogma, to put bridge-building over individual mistrust.”
The future of our economic and monetary union
The way forward must be built on a broad consensus and take into account the global challenges ahead. In this regard, the reflection papers on harnessing globalisation and the social dimension of Europe, as well as the upcoming reflection paper on the future of EU finances, will also feed the discussion on the future of our economic and monetary union.