European Union authorities on Tuesday unveiled plans for securing the stability of the Union by enforcing tighter fiscal integration with budget controls across the eurozone and establishing a European banking union.
The proposals, which enhances the existing power of European Union in Brussels over the fiscal policies of the eurozone member-states, were outlined in a report titled "Towards a genuine economic and monetary union." Incidentally, the report was released ahead of the opening of a two-day summit of EU leaders in Brussels Thursday
The report, containing suggestions made by European Council President Herman van Rompuy, European Commission President Jose Manuel Barroso, European Central Bank (ECB) chief Mario Draghi and head of the Eurogroup Jean-Claude Juncker, have already been forwarded to the governments of EU's 27 member-states.
The seven-page report, published on the EU's website on Tuesday, does not set a time frame for implementing the proposed measures. Nevertheless, it is expected that a detailed action plan for stabilizing the bloc's economy will be charted out by the end of the year. Experts have already raised concerns that the report does not contain any suggestions for addressing the current debt problems being faced by several eurozone members.
The report calls for limiting debts availed by individual eurozone nations, allowing the veto of annual national budgets if they are likely to exceed the country's debt limits, considering the prospects of collective borrowing by eurozone states, and implementing common policies on employment regulations as well as levels of taxation.
The document stresses that eurozone countries should be "in a position to require changes in budgetary envelopes if they are in violation of fiscal rules, keeping in mind the need to ensure social fairness."
It also calls for setting up a European treasury office for controlling a central budget and monitoring the budget of individual member states, establishing a single European banking regulator as well as a common scheme guaranteeing bank deposits, and engaging in joint decision-making with national parliaments to give the process a "democratic legitimacy."
Eurogroup president Van Rompuy said the suggestions made in the report were "not meant to be a final blueprint," and added that he expected "to reach a common understanding amongst us on the way forward" at the upcoming EU summit in Brussels.
Meanwhile, Barroso described the report as "a defining moment for European integration," and stressed the guiding principle of the document was that "greater solidarity and greater responsibility must go hand in hand".
"This crisis is the biggest threat to all that we have achieved through European construction over the last 60 years. Faced with this stark reality, standing still is not an option. A big leap forward is now needed," he added.
The development comes a day after Cyprus formally requested financial assistance from the euro area's bailout funds to shore up its banks struggling from exposure to debt-ridden Greece, thereby becoming the fifth eurozone country to seek a bailout loan from its partners in the single currency union.
Fellow eurozone nations like Greece, Ireland and Portugal have already availed such loans provided jointly by the EU, ECB and IMF in exchange for implementing stringent austerity measures. Spain has also formally requested a bailout aid from the European Union to shore up its ailing banking sector.
Spanish and Italian borrowing costs surged at auctions on Tuesday as investors were increasingly concerned about the outlook for the eurozone ahead of the crucial summit of EU leaders later this week.
While ratings agency Moody's downgraded 28 Spanish banks on Monday citing the reduced creditworthiness of the Spanish sovereign debt, Italy's borrowing costs spiked over concerns that Rome could be the next in line to seek a bailout.
by RTT Staff Writer
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