strengthening of the European Monetary Union (EMU) must address its current
democratic deficit and help relaunch public investment that remains worryingly
low. This is the key message delivered by the European Committee of the Regions
(CoR) in its opinion adopted on 5 July.
Tighter fiscal coordination rules were agreed back in the wake of the financial crisis in 2012. They are now being incorporated into the EU's treaties, together with new provisions transforming partly the intergovernmental European Stability Mechanism into a European Monetary Fund and introducing a European Minister of Economy and Finance. The implications of these European Commission's proposals for regions and cities were assessed by the CoR – the EU's assembly of local and regional leaders - in an opinion led by Christophe Rouillon, (FR/PES), Mayor of Coulaines. "It is worrying that the migration debate overshadows all other matters for urgent EU action. There is indeed an urgent need to make the EMU resilient before next crisis, in particular by establishing a Euro Assistance Fund to withstand the systemic threats facing the global economy. This European firewall needs to be put in place now instead of being tinkered with during the next crisis", said Christophe Rouillon when presenting the opinion to the CoR plenary.
The incorporation in the EU Treaties of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (TSCG) – commonly known as Fiscal Compact – had to be carried out in light of the assessment of its implementation. The CoR is critical that such assessment was apparently not performed, or not made public, and the proposal presented by the European Commission totally neglects the persisting low level of public investment, which has dropped from 3.4% of EU GDP in 2008 to 2.7% in 2016.
Since public investments are often the most affected by fiscal consolidation, local leaders demand that the new rules provide necessary flexibility and support, in particular, the investment capacity of local and regional authorities. In this perspective, the Stability and Growth Pact (SGP) should not consider as structural expenditure the co-financing of projects supported by the European Structural and Investment Funds, by trans-European networks (TEN) programme as well as by the Connecting Europe Facility. A provision that has been already introduced for of the national contributions to the European Fund for Strategic Investment.
Karl-Heinz Lambertz, President of European Committee of the Regions, argued that public investments co-financed with EU structural funds should not be considered as public debt, "The financial contribution by local and regional authorities in public investments must be given more flexibility. Otherwise there is a serious risk that it will hold back the ability by regions and cities to deliver investments for the benefits of citizens."
Local leaders support the incorporation of the European Stability Mechanism (ESM) – lacking transparency and exposed to blockages and vetoes - into primary EU law, accountable to the European Parliament. They strongly support the Commission proposal for important decisions regarding, inter alia, the granting of financial assistance, to be taken by an 85% weighted majority and no longer based on unanimity.
The proposal to establish a European Minister of Economy and Finance, according to EU regions and cities, would help increase democratic accountability and make EMU governance more comprehensible.
However, the democratic deficit of the EMU can only be addressed by showing European citizens that the principle of social progress is supported and that employment, wage growth and social standards are not seen as secondary to macroeconomic and budgetary concerns.
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