CONVERGENCE:THE EURO zone faces a systemic crisis and will not survive unless it becomes more integrated and disciplined, possibly through a change of the European Union's treaty, European Commission president José Manuel Barroso has told MEPs .
With France, the region’s second largest economy, now the target of intense bond market pressure and its borrowing costs soaring, Mr Barroso said “we are indeed now facing a truly systemic crisis that requires an even stronger commitment from all and that may require additional and very important measures”.
“Without . . . increased integration, convergence and discipline, we will not be able to sustain a common currency. Either member states accept it – to complete the monetary union with an economic union that requires full discipline, full convergence, full integration – or if they don’t accept this we will put at risk our goal,” he told the European Parliament meeting in Strasbourg.
Mr Barroso said such deeper integration would require changes to the European Union’s treaty, and therefore may take some time to achieve.
“Any revision of the treaty should be for deeper integration of the euro area but also for a stronger European Union,” Mr Barroso said. “But let’s not fool ourselves. Treaty change takes time and should not be seen as the immediate solution for the current crisis.”
He argued that once greater integration and discipline was achieved, it would be natural for the 17 countries sharing the euro to issue debt together – what he called “stability bonds”, which have also been called euro bonds.
The commission will present a study on joint debt instruments next week. “Such bonds could, if well designed, strengthen financial stability and fiscal discipline in the euro area and thus . . . sustainable growth and job creation Europe,” he added.
New instruments were needed to fight instability in the euro zone. “There are no miracle solutions. We have got some kinds of instruments to fight the current financial instability in Europe. If we want to keep a common currency, something more is needed, in terms of the common instruments to fight this financial instability,” he said.
He also sounded sceptical about ideas to involve large emerging economies, such as China, in funding the euro zone bailout fund, the European Financial Stability Facility, which is seeking ways of raising cash to help finance Italy and Spain if markets cut them off from financing.
“The reality is stark: we have the resources in Europe to respond, provided there is the political will,” he added.
He said measures to tighten surveillance of the budgets of euro zone countries and their economic targets would come into force as early as next month. – (Reuters)