European Integration Report

September 2018 EUROPEAN INTEGRATION REPORT

Strengthening EMU Key points to strengthen the European Economic and Monetary Union



Institutional amendments, new framework conditions and new mechanisms are needed to strengthen the euro area. The European Council has put several dossiers on the agenda but postponed others. Reforms are urgently required!



Upgrading the European Stability Mechanism is a good step. Backstop funding for the Single Resolution Fund is key to consolidating the credibility of the banking union on the financial markets.



Funding of structural reforms should be decided rapidly.



Fiscal stabilisation mechanism on euro level is advisable. The best option is a counter-cyclical rainy-day fund to cushion severe shocks. An investment stabilisation function as suggested in the Commission’s proposal would only be a first step.



Completion of banking union requires both a rapid reduction of nonperforming loans and a roadmap for deposit insurance. A European system can only be successfully established with very strict structures.



Building a framework for sovereign-bond backed securities makes long-term sense and should be tested on the financial markets. The path to reaching this goal is long.

Strengthening EMU | Key points to strengthen the European Economic and Monetary Union 27/09/2018

Content The major financial crisis and EMU deepening................................................................................ 3 Some reforms and economic policy corrections are already in place .......................................... 4 Further reforms are needed ............................................................................................................... 5 Improving macroeconomic stabilisation .......................................................................................... 5 A fiscal stabilisation mechanism ........................................................................................................... 5 Reform support programme .................................................................................................................. 6 Completing the banking union........................................................................................................... 6 Fiscal backstop for bank resolution ....................................................................................................... 7 Completing the deposit insurance scheme ........................................................................................... 7 Regulatory treatment of government bonds in bank balance sheets .................................................... 8 Further tasks.......................................................................................................................................... 8 Strengthening crisis management by creating European Monetary Fund ................................... 8 Turning the ESM into a European Monetary Fund................................................................................ 8 Advancing the Capital Market Union and introducing new bonds ................................................ 9 Strengthening governance ............................................................................................................... 10 Transposing the fiscal compact into the treaties .......................................................................... 11 Sources .............................................................................................................................................. 11 Imprint ................................................................................................................................................ 13 Author ................................................................................................................................................. 13

2

Strengthening EMU | Key points to strengthen the European Economic and Monetary Union 27/09/2018

The major financial crisis and EMU deepening The major economic and financial crisis of 2008 to 2012 brought to light not only a series of adverse developments in national economic policies, foreign trade imbalances and a loss of fiscal control, but also a large number of structural weaknesses in the Maastricht Treaty and in the institutional architecture of the monetary union. The Maastricht Treaty is based on the assumption that imposing fiscal regulations on public budgets and market discipline on governments would result in healthy public budgets, that productivity-based collective wage agreements between employers and trade unions would lead to stable wage trends, that national counter-cyclical fiscal policy implemented primarily through automatic stabilisers and national financial market supervision would be sufficient, and that trade and capital flows would in and of themselves lead to convergence rather than imbalances. The original structure of the monetary union did not adequately address the risks of financial instability in the private sector following on from a credit boom, which is the most frequent trigger of crises and was the main factor behind the European crisis.1 Furthermore, the fundamental incompatibility of having a single financial market and monetary union but national financial market supervision was maintained for much too long, despite warnings from both academics and practitioners. Thirdly, no consensus was reached on the question of whether a monetary union necessarily needs fiscal mechanisms to ensure its stability. 2 During the political decision-making period in the late 80s and early 90s, the political climate did not allow for the implementation of these much needed complementary regulations in the introduction of monetary union, and their importance was rather neglected by some of the major economic schools of thought. 3 Furthermore, concerns were strongly focused on maintaining financial discipline following the introduction of the euro and on the adjustment of real wages and prices – which tend to react sluggishly and are downwardly inflexible – to the heterogeneous cyclical and structural development once the exchange rate mechanism had been eliminated. These concerns were by no means unfounded and became significant in the crisis (for example in the case of Greece’s financial policy or divergent wage trends between crisis countries and Germany). On the other hand, worries about whether an independent new central bank would be able to keep “the euro as strong as the German mark” did turn out to be unfounded as the ECB has been very successful in keeping the euro strong, and recently, instead of battling excessive levels of inflation has had rather the opposite problem of getting inflation back up to its target rate.4 During the years of the crisis, rescue measures were taken to bail out banks, market segments and governments, and new political instruments and institutions such as the European Stability Mechanism were introduced to get the situation back under control and overcome the multiple crises of banks, financial markets and states.5 Essentially, measured are now being taken that should have been taken from the very beginning – establishing single supervision over the banking system with a single set of regulations, a crisis management mechanism and basic fiscal instruments. The keywords of the reform debate are therefore banking union, capital markets union and fiscal union. This process has not yet

1

Schularick and Taylor (2012) and Eichengreen (2015).

Berger, Dell’Arricia and Obstfeld (2018).

3 Refered to by Constâncio (2018a).

4 Constâncio (2018b) and Praet (2018) set out the phases of monetary policy.

5 See also Eichengreen (2015, 2018), Brunnermeier, James and Landau (2017), Cline (2016), Constâncio (2018a), Draghi (2018).

2

3

Strengthening EMU | Key points to strengthen the European Economic and Monetary Union 27/09/2018

been completed, of course, not least because the heads of state and government and their finance ministers have, for many years, only heeded the recommendations of the European institutions 6 on a very selective basis and because comprehensive proposals to strengthen the overall system were only put forward a few years after the crisis. This is not to say that nothing has been undertaken. National governments and the European institutions have made a great many changes to their economic policy and introduced new sets of regulations aimed at promoting the stability of the system and these will, in all likelihood, fulfil their purpose.

Some reforms and economic policy corrections are already in place Under the initiative of the G20, the regulation of the financial system in the EU was completely overhauled. This included drastically increasing capital and liquidity requirements for banks, strengthening risk management and introducing a large number of financial market regulations, particularly for derivatives. The legal framework for the restructuring and resolution of banks was completely revised, and a resolution and restructuring mechanism for credit institutes was established along with a board and a fund. Furthermore, several legislative and regulatory packages aimed at reducing non-performing loans have already resulted in significantly reducing their number and will continue to bring about further corrections.

At the same time, the crisis countries have suffered harsh adjustments in domestic demand, external accounts, bank lending, public spending and on the labour market over a period of several years.

Ireland, Italy, Portugal, Spain and Cyprus have succeeded in getting back to economic growth, rising employment, healthy public budgets and even trade surpluses. Greece has not yet recovered but has at least been able to terminate the financial assistance programme.

The crisis nonetheless curbed overall economic growth in the euro area, posed major problems for the ECB, and has come at a very high economic cost, some of which was unnecessary and only caused because the rescue measures took too long, the fiscal policy in 2012 and 2013 was too restrictive, and the restructuring of banks deviated greatly from textbook methods. Moreover, the euro area did not have a coordinated financial policy or sufficient tools to cushion the decline in prosperity. This made the collective recovery longwinded and it only really firmed up in 2017 when bank lending and investment activity also revived. The latest figures show that fiscal policy needs to be better coordinated in times of economic upswing as well. Many economies are currently excessively expansionary, so the fiscal policy of the monetary union as a whole is probably too aggressive, particularly given the considerable need to consolidate public debt.

6

As in the Four/Five Presidents’ Report of Van Rompuy (2012) and Juncker (2015).

4

Strengthening EMU | Key points to strengthen the European Economic and Monetary Union 27/09/2018

Further reforms are needed There is, at least, consensus in Europe that the steps taken so far are not yet adequate to reliably maintain the stability of the monetary union in a future crisis, or not at reasonable cost and by means of legitimate democratic procedures and regulated processes. For this reason there is still a wealth of reform proposals. These are aimed at generally strengthening the market discipline of member states before a crisis, and possibly also in a crisis situation, as well as national economic policies overall, adapting the tasks of the European institutions (ECB, ESM, European Commission, Council and Parliament) and creating new legal foundations, institutions and policy instruments at EU and euro level to enable the management of interdependencies in the common currency area. Economic policy measures to increase convergence in the monetary union as a whole are also warranted.7 The debate is as multifaceted as it is complicated. The discussion attracted a lot of attention due to the various proposals put forward by President Macron8 after he took up office, through the European Commission in December 2017 and May 2018, and through the decisions of the governments of Germany and France at Schloss Meseberg in June 2018. 9 At the academic level, there is also a plethora of contributions on how to balance risk reduction and risk division, such as the compromise proposals of 14 economists from Germany and France. 10 In the following section I will address the key points involved.

Improving macroeconomic stabilisation In future, the euro area must be better equipped to address macroeconomic stabilisation in the euro area as a whole, also using financial policy instruments to tackle asymmetric shocks. The debate on this topic has been controversial for around five decades but agreement is gradually being reached on practical steps going forward. Experts have long prepared numerous concepts on how to proceed here.

A fiscal stabilisation mechanism A fiscal stabilisation function should be created for the euro area, as suggested in various Four/Five Presidents’ Reports of the EU institutions since 2012. 11 This function should primarily serve to cushion the Union and member states from severe asymmetrical shocks by making rapid counter measures available. The last crisis has shown that even countries with high budgetary surpluses prior to the start of the crisis did not always have the leeway required to let the automatic stabilisers of compensatory social policy take effect and have a counter-cyclical impact. A vigorous structural policy to tackle the root causes in conjunction with early counter-cyclical stabilisation would be effective in avoiding such situations. Subsidies or subsidised loans could be used for this purpose, funded by the EU budget, a special fund, or the ESM/EMF for a limited period of time of between one and three years. These funds could be used not only to stabilise public and private investment activity but also to smooth private consumption. To qualify, a country would have to comply with the EU regulations on economic and

7

Enderlein et al. (2016).

Macron (2017).

9 European Commission (2017a, 2018a, b). Federal Government (2018a, b).

10 See Bénassy-Quéré et al. (2018).

11 Van Rompuy (2012), Juncker (2015).

8

5

Strengthening EMU | Key points to strengthen the European Economic and Monetary Union 27/09/2018

financial policy (Stability Pact, Excessive Imbalance Procedures). Such programmes should be decided by rule-based discretion. A trigger to initiate such a programme could certainly be a rapid increase in unemployment over the long-term average.

It would be particularly effective to finance these measures with a special fund into which members pay a fixed target volume (1-2 percent of EU GDP) and that is built up over several years (similarly to the Single Resolution Fund), or, in future, with an EU budget in the form of subsidies. Regarding loans, the interest rate advantage resulting from a central provision of funds would have an especially high impact. The Commission recently proposed establishing a lending facility of up to 30 billion euros from the EU budget together with an interest rate subsidy, in order to maintain a country’s public investment level at its average level of the previous five years. This is better than nothing but is still not an adequate solution, particularly as it does not increase the borrowing capacity of the Commission, as the Commission explicitly concedes.12 This proposal would only work in conjunction with normal national stabilisation measures using automatic stabilisers and targeted counter measures within the fiscal regulatory framework.

The fiscal stabilisation of the euro area overall and the development of a common fiscal approach should be more carefully thought through as it seems that cross-border effects can cancel out or reinforce each other. It is definitely not the case that the sum of national financial policies spontaneously results in the right mix for the euro area as a whole.

Reform support programme A further tool to strengthen reforms is the reform delivery tool proposed by the European Commission.

Federal Chancellor Merkel and others have also put forward similar ideas. The tool would be used to co-finance certain structural reforms that would incur extra fiscal costs, at least at the beginning. These reforms should of course be aligned to the country-specific recommendations published by the European Semester for economic policy cooperation. An example could be the creation of vocational training paths. The Commission’s proposal for the new Multiannual Financial Framework includes a programme framework of 22 billion euros over a period of seven years for these purposes with two programme periods of eleven billion euros each. Additional funds are also earmarked for technical support and to help countries without an opt-out on their way to joining the euro. This is a useful addition and the proposed budget of a further three billion euros is of a manageable size.

Completing the banking union In the last few years, the EU has adopted numerous legal regulations to secure single supervision by the ECB (from 2014), increase the resilience of banks and, in case of crisis, increase the liability of owners and preferential creditors in the restructuring and resolution of banks (from 2016). These regulations have built up a considerable safety buffer.

12

European Commission (2018b).

6

Strengthening EMU | Key points to strengthen the European Economic and Monetary Union 27/09/2018

Fiscal backstop for bank resolution A fiscal backstop for rescue measures has not yet been decided upon. It would come at the end of a liability chain of owners, creditors and the Single Resolution Fund, which will have a volume of 55 billion euros by 2024, to temporarily fund eventual gaps in financing during a crisis with temporary public loans. Plans are to set up an ESM credit facility for this purpose. The backstop funding would have to be paid back by the banks afterwards. A fully financed system of this kind would also make it easier for supervisory authorities to take action without fear of uncontrollable consequences. The corresponding legal regulations are scheduled to be launched in the course of the year, but there are still a great many legally and politically complex details that require clarification. Furthermore, either the statutes of the ESM or the treaties would have to be clarified in order to transpose it into Community legislation.

Completing the deposit insurance scheme Furthermore, a deposit insurance framework was established in 2015, whereby all member states will be required to pay contributions amounting to 0.8 percent of all deposits covered by the scheme by 2024, insure deposits of up to 100,000 euros and meet other minimum standards. The implementation and filling of the deposit insurance schemes is in progress but at differing speeds. Credit facilities between the countries’ systems are already possible on a voluntary basis.

However, there is still no single deposit insurance scheme for the monetary union and the European single financial market. Ultimately, it is a matter of being able to legally, politically and institutionally restructure and resolve banks and to make decisions on insuring deposits from a single source. This is the only way to make deposit insurance fully credible and, in case of crisis, avoid runs on banks, i.e. a chaotic withdrawal of funds by worried investors. This would also eliminate the market distortions caused by having different systems, reduce the link between banks and the states in which they are based, and drastically decrease the vulnerability of banking systems against major national shocks.

Purely national systems cannot deal very well with either the cross-border capital flows of a single financial market or with the knock-on effects of a banking system shaken by crises. The insurance advantages of a euro-wide solution are obvious.13 It is, however, equally clear that only healthy banks and sufficiently restructured banking systems can be included in this kind of system.

After years of delays in addressing the dossier, which was officially proposed by the Commission in 2015 and modified in 2017,14 it is very important that the member states now agree on a roadmap. This roadmap needs to define when and how, in other words, through which intermediate steps and milestones, this goal is to be achieved, the extent to which risks in bank balance sheets need to be reduced before the scheme enters into effect, the level of insurance that needs to be provided by own funds, the risk premiums that can be charged by the single authority according to institution or country, and the final institutional arrangement. Ultimately, the EMU needs a single institution that efficiently pools the tasks of bank resolution and deposit insurance.15

13

See Schoenmaker (2018) and Carmassi et al. (2018).

European Commission (2015).

15 See Schoenmaker (2018), Sapir and Schoenmaker (2017) and Gros and Schoenmaker (2014).

14

7

Strengthening EMU | Key points to strengthen the European Economic and Monetary Union 27/09/2018

Regulatory treatment of government bonds in bank balance sheets The role of own government bonds in bank balance sheets raises a number of regulatory questions. A whole number of options is available to reduce excessively close links between sovereign bonds and bank balance sheets including ceilings, concentration rules, general capital reserve requirements and action by the supervisory authority. These options would have to be exercised with great caution as they could cause distortions on the market. Furthermore, they would only have an impact in the medium term as the financing of states must remain ensured during the transition to a new system. An excessive concentration risk can already be addressed by the supervisory authority. A basic agreement on an international level would be the best option in order to establish the same rules worldwide, but the Basle Committee was not able to reach agreement here. The European Systemic Risk Board has presented the options available to the EU,16 but agreement within the Council structures has not yet been possible.

Further tasks A convergence of insolvency systems in the euro area would be advantageous as it would lead to a similar realisation of collateral within the euro area. Further clarification is still needed regarding the provision of liquidity by the ECB in case of a bank resolution.

Strengthening crisis management by creating a European Monetary Fund Turning the ESM into a European Monetary Fund The creation of the European Stability Mechanism became necessary to overcome the crisis and enable funding for member states in difficulties. Above all, the EU must in future be able to tackle financial crises independently.17 To achieve this objective, the ESM needs to be expanded into a European Monetary Fund.

The ESM is already fulfilling most of the functions involved, i.e. it has an institutional architecture and governance, funds with which to finance programmes, and tools for long-term financing and for precautionary measures (precautionary credit facilities), it analyses the economic situation and successfully raises funds from the capital market. Agreement was also recently reached with the Commission on the division of tasks in the analysis of the debt sustainability of member states. The fiscal backstop for the SRF (and, in future, an integrated single resolution and deposit insurance scheme) should also be based at the EMF (see above).

New credit facilities would only be useful if preventative macroeconomic stabilisation measures were not carried out through other instruments in the budget, which would be preferable on the whole. If these facilities are to be based at the ESM/EMF, they should not be subject to the present full programme requirements and ratification obstacles.18 Fund and subsidy solutions would definitely be the better option.

16

The options are set out in the ESRB report (2015).

Lang (2018), Sapir and Schoenmaker (2017).

18 On this topic, see Andritzky (2018).

17

8

Strengthening EMU | Key points to strengthen the European Economic and Monetary Union 27/09/2018

We do not believe that it is necessary to formally create a restructuring mechanism for the public debt of a country under an assistance programme. It would be more important to orient the process on the rules of the creditor-debtor dialogue that have been established for a good 20 years by the Paris Club and the Institute of International Finance. Some decisions could be made with higher quorums in majority decision-making.

Transposition into European law would also be a good step, as well as supplementary accountability to the European Parliament. The existing rights of national parliaments would have to be secured in order to maintain the unity of liability and control as the funds will come from national contributions. No changes are required in the macroeconomic and fiscal supervision of the member states regarding compliance with European Commission regulations. There should be close cooperation on these issues, without duplicating existing work. The same goes for financial stability issues in the euro area, which have already been addressed at length by the European Commission, the ECB and the ESRB. Furthermore, the ECB should no longer be officially involved in the programme negotiations and agreements but only provide consultation (for banking and financial system issues), as this is outside the normal mandate of a central bank.

What is required, on the other hand, is a liquidity management regime in case of crisis. It is questionable, however, whether the existing though not used direct bank recapitalisation instrument is still needed, as other mechanisms have since been established to address such problems. The IMF, for example, does not award these kinds of financial assistance programmes to its member states solely for such purposes. Furthermore, the general rule should be that the EU manages its programmes without additional IMF loans, although this option probably should not and cannot be ruled out in individual cases. The implementation of such a reform package is highly complex in terms of European, constitutional and international law and is also anchored differently in the individual member states. It is beyond the scope of this statement to address this intricate issue here.

Advancing the Capital Market Union and introducing new bonds The integration of the financial markets in the EU has, until recently, stalled almost completely following the major financial crisis.19 Sub-segments of the financial market have only recently got back to normal.

A highly integrated financial market would, however, play an important role in balancing out regional differences, giving consumers in crisis regions greater stability for their financial assets in safe countries. Deeper integration through cross-border security ownership, the bonds markets, and direct investment would also increase resilience. The banking system would also be more stable if cross-border loans and deposits reached a significant volume and banks could compensate for weaknesses in one regional market with positive developments in other regions. The credit and equity markets are still dominantly domestic. An efficient and integrated capital market is also important for innovation and growth in the EU. Legislation for constructing the Capital Markets Union so far has introduced a more European regime for venture capital funds, a new regime for securitisation (albeit with severe weaknesses) and new regulations for securities and counterparties, but there has been hardly any progress in corporate tax-

19

European Commission (2018b), EZB (2018), Sapir, VĂŠron and Wolff (2018).

9

Strengthening EMU | Key points to strengthen the European Economic and Monetary Union 27/09/2018

ation, insolvency law and in strengthening the supervision of the European securities markets. Numerous dossiers are still under negotiation and should be addressed in the next legislative period. The same applies to creating a new class of securities, Sovereign-Bond Backed Securities. The Commission recently presented a legislative proposal for a market-driven development of SBBS. Such an instrument could, in the long term, make a significant contribution to breaking the dangerous link between bank balance sheets and sovereign bonds. The ESRB has published a report with extraordinarily complicated proposals for SBBS.20 Ultimately, the acceptance of the new tool on the capital markets would be crucial to its success.

Strengthening governance The proposals of the European Commission of December 2017 and of two reports by the European Parliament to create a European Economy and Finance Minister have so far been discussed by the Council working parties without any results. In the medium term, many factors speak in favour of improving euro area governance by pooling tasks and instituting further institutional reform.21 The tasks of this office should include the macroeconomic supervision and coordination of fiscal and economic policy and the corresponding regulations, the application of euro area fiscal stabilisation instruments, the direction of the crisis management institutions (Single Resolution Fund, possibly deposit protection, ESM/EWF22), accountability to the European Parliament, and the international representation of the euro area. The office would ideally be anchored in the Commission and the Council (Economic and Finance Ministers), similarly to the High Representative of the European Union for Foreign Affairs, and should also take on the leadership of the Eurogroup, which would also have to be formalised. If this proves to be too controversial, the Council formation could also be chaired by a permanent full-time Eurogroup head, who would then also have to be the chair of the ESM/EMF. Dividing up these tasks would again lead to the problem that action in the event of a crisis would not be fully coordinated. The same applies both to the tasks and the institutional home of fiscal crisis management tasks. The new office should also be the primary external representation of the EMU and not, as has so far been the case, one of the four institutions in a highly complex division of tasks. This would considerably strengthen the coherence of action taken and both internal and external communication.

Further steps to strengthen governance have already been taken and largely implemented with the creation of a European Fiscal Board and National Productivity Boards. It will be important moving forward that these institutions and their recommendations also feed into national and European economic and financial policy.

20

ESRB (2018).

European Commission (2017a, b, c), see also the reports of the European Parliament on the reform of the EU within the treaties by Bresso and Brok and Verhofstadt (European Parliament 2017a, b) and Wolff (2017) on the debate.

22 This would only be consistently possible if it took over the leadership of the Eurogroup as a substitute to a limited or permanent Eurogroup president. The inclusion of the Eurogroup in the treaties would require contractual amendment.

21

10

Strengthening EMU | Key points to strengthen the European Economic and Monetary Union 27/09/2018

Transposing the fiscal compact into the treaties It would also be expedient to transpose the intergovernmental Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (Fiscal Compact) into Union legislation and to integrate it institutionally in the normal macroeconomic supervision. This intention was expressed in the preamble, and has been correspondingly called for by the European Parliament and the Commission.

Sources Andritzky, Jochen (2018). Enhancing the ESM lending toolkit through a precautionary credit line. Blog Post. Bruegel. 11 June.

Bénassy-Quéré, Agnès, et al. (2018). Reconciling risk sharing with market discipline: A constructive approach to euro area reform. Centre for Economic Policy Research, No. 91.

Berger, Helge, Giovanni Dell’Arricia and Maurice Obstfeld (2018). Revisiting the Case for Fiscal Union in the Euro Area. IMF. Washington, D.C..

Brunnermeier, Markus, Harold James, Jean-Pierre Landau (2017). Euro: Der Kampf der Wirtschaftskulturen. Munich. Beck.

Bundesregierung (2018a). Meseberg Declaration. Pressemitteilung 214/18. 19 June. Presse- und Informationsamt der Bundesregierung. Berlin.

---(2018b). Deutsch-französischer Fahrplan für das Euro-Währungsgebiet. 19 June. BMF. Berlin.

Carmassi, Jacopo, Sonja Dobkowitz, Johanne Evrard, Laura Parisi, André Silva, Michael Wedow (2018). Completing the Banking Union with a European Deposit Insurance Scheme: who is afraid of cross-subsidisation? ECB. Occasional Paper 208. April.

Cline, William R. (2014). Managing the Euro Area Debt Crisis. Peterson Institute for International Economics. Washington, D.C..

Constâncio, Vitor (2018a). Completing the Odyssean journey of the European Monetary Union. Remarks at the ECB Colloquium on the Future of Central Banking. Frankfurt/M. 16-17 May. ---(2018b). Past and future of ECB monetary policy. Rede. Valetta. 4 May. Draghi, Mario (2018). Risk-reducing and risk-sharing in our Monetary Union. Rede am Europäischen Hochschulinstitut in Florenz. 11 May. Eichengreen, Barry (2018). Euro Malaise: From Remission to Cure. Milken Institute Review. 22 January.

---(2015). Hall of Mirrors. The Great Depression, the Great Recession, and the Uses – and Misuses – of History. Oxford, New York: Oxford University Press.

11

Strengthening EMU | Key points to strengthen the European Economic and Monetary Union 27/09/2018

Enderlein, Henrik, Enrico Letta, Jörg Asmussen, Laurence Boone, Aart De Geus, Pascal Lamy, Philippe Maystadt, Maria João Rodriguez, Gertrude Tumpel-Gugerell und António Vitorino (2016). Repair and Prepare. Growth and the Euro after Brexit, Gütersloh, Berlin, Paris: Bertelsmann Stiftung, Jacques Delors Institut – Berlin und Jacques Delors Institute in Paris.

European Commission (2018a). A modern budget for a union that protects, empowers and defends.

The Multiannual Financial Framework for 2021-2027. COM(2018) 321 final. 2 May. ---(2018b). Proposal for a regulation of the European Parliament and of the Council on the establishment of a European Investment Stabilisation Function. COM(2018) 387 final.

---(2018c). European Financial Stability Review. Brussels.

---(2018d). Communication. 2018 European Semester – Country-specific recommendations.

COM(2018) 400 final.

---(2017a). Communication. Further Steps towards Completing Europe’s Economic and Monetary Union: a Roadmap. COM(2017) 821 final. Brussels. 6 December.

---(2017b): Communication on Completing the Banking Union. COM(2017) 592 final.

---(2017c). Communication. A European Minister of Economy and Finance. COM(2017) 823 final.

Brussels. 6 December.

---(2015). Communication of the European Commission. Towards Completing the Banking Union.

COM(2015)587.

European Parliament (2017a). Bericht über die Verbesserung der Funktionsweise der Europäischen Union durch Ausschöpfung des Potenzials des Vertrags von Lissabon. A8-0386/2016 (2014/2249(INI)). Ausschuss für konstitutionelle Fragen. Berichterstatter: Mercedes Bresso, Elmar Brok.

---(2017b). European Parliament resolution of 16 February 2017 on improving the functioning of the European Union building on the potential of the Lisbon Treaty. P8_TA-PROV(2017)0049 (2014/2249(INI)).

European Systemic Risk Board (2018). Sovereign bond-backed securities: a feasibility study. January. Frankfurt/M. ---(2015). ESRB report on the regulatory treatment of sovereign exposures. Frankfurt/M. European Central Bank (2018). Financial Integration in Europe. Frankfurt/M. Gros, Daniel, Dirk Schoenmaker (2014). European Deposit Insurance and Resolution in the Banking Union. Journal of Common Market Studies 52(3): 529-546.

Juncker, Jean-Claude, with Donald Tusk, Jeron Dijsselbloem, Mario Draghi, Martin Schulz (2015). The Five Presidentsʼ Report: Completing Europe’s Economic and Monetary Union. European Commission. Brussels.

12

Strengthening EMU | Key points to strengthen the European Economic and Monetary Union 27/09/2018

Lang, Joachim (2018). Europa muss seine Finanzkrisen selbst lösen. Frankfurter Allgemeine Zeitung.

19 March.

Macron, Emmanuel (2017). Initiative for Europe: A Sovereign, United, Democratic Europe. Speech at Sorbonne. Paris. 26 September.

Praet, Peter (2018). Monetary policy in a low interest rate environment. Speech at the Congress of Actuaries. Berlin. 6 June.

Sapir, André, Dirk Schoenmaker (2017). The Time is Right for a European Monetary Fund. Bruegel Policy Brief. 2017.4. Brussels.

Sapir, André, Nicolas Véron, Guntram B. Wolff (2018). Making a reality of Europe’s Capital Markets Union. Policy Contribution 7 April. Bruegel. Brussels.

Schoenmaker, Dirk (2018). Building a stable European deposit insurance system. Bruegel Blog Post.

19 April. Brussels.

Schularick, Moritz, Alan Taylor (2012). Credit booms gone bust. Monetary policy, leverage cycles, and financial crises, 1870-2008. American Economic Review 102(2): 1029-1061.

Van Rompuy, Herman, mit Jose Manuel Barroso, Jean-Claude Juncker, Mario Draghi (2012).

The Four Presidents’ Report: Towards a Genuine Economic and Monetary Union. European Council.

Brussels.

Wolff, Guntram (2017). Beyond the Juncker and Schäuble Visions of Euro-Area Governance. Bruegel Policy Brief Nr. 6.

Imprint Bundesverband der Deutschen Industrie e.V. (BDI) Breite Straße 29 10178 Berlin T: +49 30 2028-0 www.bdi.eu

Author Dr. Klaus Günter Deutsch T: +49 30 2028-1591 k.deutsch@bdi.eu

13