President of the
Herman Van Rompuy
© European Union, 2012
Economic and Monetary Union (EMU) is on its way to becoming more resilient in the months and years to come, underpinned by greater integration and reinforced solidarity for the eurozone. On 14 December 2012, EU leaders agreed on a process that will deepen integration of the financial framework and strengthen economic governance to complete EMU.
The Roadmap adopted by the European Council follows the report Towards a genuine Economic and Monetary Union prepared by the President of the European Council Herman Van Rompuy together with the Presidents of the European Commission, the European Central Bank and the Eurogroup. It also reflects the separate Blueprint for a deep and genuine EMU presented by the European Commission.
The Roadmap stresses the need to build on the existing institutional and legal framework. It underlines the need to respect the integrity of the single market, by establishing a sound framework for the euro area that is fair, transparent and open to all other EU countries.
1. Banking union
The first important step in the creation of a banking union is the setting up of a Single Supervisory Mechanism (SSM), covering euro-area banks and open to all member states. The deal struck by ministers on 13 December allows the Council Presidency to negotiate with the European Parliament with the aim of reaching a final agreement rapidly so that the SSM can be implemented as soon as possible.
The SSM will be composed of the European Central Bank and national competent authorities. The European Banking Authority will retain its role of developing standards and ensuring consistency.
Once an effective SSM is established, the European Stability Mechanism (ESM) will be able to recapitalise banks directly. An agreement on the operational framework supporting this possibility, including the definition of legacy assets, should be agreed as soon as possible in the first semester of 2013.
The SSM will start supervising in March 2014, or 12 months after the entry into force of the legislation, whichever is later.
Bank capital requirements
New rules on bank capital requirements (CRR/CRD IV) to make the financial sector better equipped to manage risks and absorb shocks are in the final stages of negotiation. The European Council considers them "of the utmost priority" and calls for their rapid adoption.
Bank resolution and deposit guarantee schemes
Legislative proposals on more harmonised national bank resolution and deposit guarantee frameworks should be agreed before June 2013, according to the Roadmap.
A single resolution mechanism
The Commission will propose, in the course of 2013, a single resolution mechanism for member states participating in the SSM. This mechanism, including appropriate and effective backstop arrangements, will safeguard financial stability if banks fail, but will also protect taxpayers, as it will be based on contributions from the financial sector itself. The objective is to reach agreement on this mechanism by the summer of 2014.
2. Fiscal sustainability and reinforced economic policy coordination
The immediate priority in this area is to complete and implement key legislation for stronger economic governance. The leaders called for rapid adoption of the "two-pack" to reinforce fiscal surveillance in the euro area. It will complement the "six-pack" on fiscal and macroeconomic surveillance in the EU, which contains some specific rules for euro-area members and was agreed in November 2011. The third main element is the Treaty on Stability, Coordination and Governance (TSCG, 'Fiscal Compact'), which is expected to enter into force early in 2013.
3. Economic policy issues to be considered by the June 2013 European Council
A number of other important questions related to the economic policy coordination of the euro area need to be examined further. President Van Rompuy, in close cooperation with the President of the Commission, will present to the June 2013 European Council a roadmap on the following issues:
- greater ex ante coordination of member states' major economic policy reforms (see Article 11 of TSCG). The Commission will propose a framework for this in the context of the European Semester.
- the social dimension of EMU.
- the feasibility of "mutually agreed contracts for competitiveness and growth". These contracts would be mandatory for euro-area member states and voluntary for the others.
- solidarity mechanisms to support such contracts.
4. Democratic legitimacy
Throughout the process, an overarching principle is "to ensure democratic legitimacy and accountability at the level at which decisions are taken".
This could be done for instance by introducing "new mechanisms increasing the level of cooperation between national parliaments and the European Parliament" (see Article 13 of TSCG and Protocol No 1 to the Treaties).