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Othmar Karas Building a Stronger Economic and Monetary MEP European Parliament Union to the Benefit of all European Citizens A quarter of a century ago, the Treaty 7.8 percent of its GDP corresponding of Maastricht became effective and to EUR 22 billion, the positive effect of paved the way for our single currency. the euro for Austria was greater than The euro was born as an accounting for any other euro area country in that currency in 1999 and euro banknotes year3. Regrettably, the euro is not always and coins began to circulate in 2002. perceived as such a success, which is Today, the euro is, after the U.S. dollar, partly due to the turbulences caused by the second most important currency in the global financial and economic crisis the world and the common means of that started in the United States in payment for more than 340 million 2007 to 2008. Europeans in 19 Member States. Sixty This recent crisis has undeniably countries and territories, representing revealed several weaknesses in the sys- another 175 million people, have tem underpinning the euro. In response, pegged their own currencies directly the EU adopted more than 40 pieces of or indirectly to the euro. After Brexit, legislation to stabilize markets, restore an estimated 85 percent of the total trust and increase the resilience of the GDP of the EU will be generated by financial sector as a whole. These mea- the economies of euro area countries1. sures include more stringent capital and liquidity requirements for all of the The euro – a success story © Europäisches Parlament currently 6,500 banks in the EU, the Looking back, the euro is on many introduction of the banker’s bonus cap, levels a success story. It has brought the establishment of the European immense tangible benefits for people, supervisory authorities (ESAs) as well firms and the euro area countries. as the Single Supervisory Mechanism Firstly, price stability, which has ensured (SSM), the Single Resolution Mecha- that our living standards are no longer nism (SRB) and strengthened deposit at the mercy of the high inflation and insurance. As so often in the history of volatile exchange rates of the 1970s and European integration, the biggest steps 1980s. Secondly, the abolition of expen- forward were made under duress, at sive charges for citizens travelling from the height of or immediately after a one euro country to another or for crisis. Also due to the constraints of transferring and withdrawing money in time, emergency interim measures – another euro country than at home. such as the establishment of the euro Thirdly, cheaper credit for households rescue system, the European Stability and businesses and on average enor- Mechanism (ESM), or the agreement mous savings of time and money for on the fiscal compact – have been firms, given there are no more exchange- established only on an intergovernmental rate risks nor transaction costs for basis. To increase democratic account- cross-border operations2. McKinsey ability and control, they still have to be has calculated that in 2010 the euro fully incorporated into EU Community boosted the wealth in the euro area Law. As long ago as in 1950, the French by no less than EUR 332 billion. With Foreign Minister Robert Schuman pointed 1 European Commission. 2017. 2 European Commission. 2017. 3 McKinsey. 2010. 45th ECONOMICS CONFERENCE 2018 163 Othmar Karas Othmar Karas it out well: “Europe will not be made all and Chancellor Merkel –, are in fact apart and fall back into the concept of the For example, we must complete the at once, or according to a single plan. It nothing new. They reflect imperatives, nation-state, with all of its consequences.” banking union as soon as possible. Ten will be built through concrete achievements which have been acknowledged for He went on: “The outcome of the Maas- risk-reducing measures for the EU which first create a de facto solidarity.” many decades to make up an effective tricht negotiations has established the path banking sector are close to being The adopted measures have con- economic and monetary policy. to European economic and monetary union, adopted. They include the reduction of tributed to making the euro stronger clearly and once and for all.”8 nonperforming loans, the revision of than before 2008. Today, unemploy- The far-back reaching roots Already at the time of birth of the the macroprudential framework, the ment in the EU has fallen to its lowest The underpinnings of the EMU can be Maastricht Treaty, Helmut Kohl was reduction of options and national dis- level in eight years and EU growth is set traced back at least 60 years when Ger- convinced that a common currency cretions in the application of capital and to remain robust with 2.1 percent in many, France, Italy, Belgium, Luxem- would inevitably lead to the introduc- liquidity requirements, the improve- 2018 and with 2 percent in 20194. With bourg and the Netherlands agreed to tion of a common budgetary, fiscal and ment of the bail-in instrument and the Greece successfully concluding the finan- implement joint economic policies in economic policy. The euro was never a introduction of a binding leverage ratio cial assistance programme on 20 August 1957. The European Economic Com- project for few, but always a project for and net stable funding ratio. There is, 2018, the last Member State has left the munity (EEC) came to life in that year all Member States. The euro is a political on the risk-sharing side, the urgent euro’s rescue fund5. Clearly, even the with the signing of the Rome Treaties. project, designed to pave the way for a necessity to complete the third pillar of most difficult tasks can be managed Just a little more than a decade later – political union. Except for Denmark the banking union with the establish- together in Europe, if only the political when Member States found themselves and the United Kingdom, which have ment of a common European Deposit will to do so is present. facing ever more frequent monetary an opt-out clause, all EU Member Insurance Scheme (EDIS) as well as the However, our Economic and Mone- turbulences – they instructed the Luxem- States have committed themselves to stronger application of the principle of tary Union (EMU) is not yet completed. bourgian Prime Minister Pierre Werner introduce the euro once they have met proportionality with the reduction of We must continue to draw the right to draw up a three-stage plan to estab- the convergence criteria. All EU citizens unnecessary bureaucracy and regulatory lessons from the crisis and address the lish an Economic and Monetary Union. – irrespective from which Member burdens for small and non-complex structural and institutional weaknesses In his 1970 report, Werner states that: State they come from, and irrespective institutions. that remain. In fact, there should be no “the economic and monetary union thus of whether that Member State is in the In addition, there are over 30 initia- complacency about the necessity to appears as a leaven for the development of euro area or not – are affected when it tives of the capital markets union (CMU) strengthen the euro’s architecture to political union, which in the long run it comes to the further development of to strengthen capital markets and in- ensure financial stability, growth and cannot do without”. He argued further our EMU. vestment in the EU. At this stage, over jobs in Austria and Europe. As Vice- that: “the economic and monetary union is two thirds of them have been imple- President Dombrovskis and Commis- an objective realizable in the course of the A complete EMU is a necessary mented. Although we want to create a sioner Moscovici jointly stated, “the present decade, provided the political will development step for our Union CMU, this does not mean we have a euro area does not need only firefighters – of the member states to realize this objec- The euro is much more than just a cur- capital market in Europe. With approx- it also needs builders and long-term tive (...) is present”7. rency. A complete EMU is not an end imately 70 percent, the biggest part of architects”6. The challenges of globalisa- As we know, it took more than two in itself, but a vital step in the develop- our real economy is bank-financed and tion, digitalisation and Brexit are exac- decades until the aforementioned Treaty ment process of our Union. The Five the CMU must therefore be a financing erbated by the daunting fact that the of Maastricht became effective and laid Presidents’ Report9, published in June union for our real economy. Measures euro is still the only currency in the the legal foundation for our common 2015, and the recent Reflection Paper include, for example, the European world which is not yet backed by a com- currency in 1993. The day after the nego- by the European Commission10, have investment engine EFSI (European mon budget, fiscal, economic and tax tiations on this Treaty were concluded, laid out the timetable for deepening the Fund for Strategic Investment) – which policy. Yet the ideas for the further the then German Chancellor, Helmut EMU until 2025. The large majority of to date has mobilised EUR 335 billion development of the EMU that are cur- Kohl, said: “The way to European unity is all the measures necessary to complete of investment in the EU (EUR 3.9 billion rently being discussed – including the irreversible. The member states of the Euro- the picture are either lying on the table in Austria), supported 750.000 jobs proposals and ideas put forward by pean Community are now bound in such a as legislative proposals by the European and 700.000 small and medium-sized President Juncker, President Macron way that it is impossible for them to split Commission or are already well advanced companies and will continue as part of in the EU legislative process.

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