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The European Union’s New Strategic Agenda for 2019-2024 and the Economic and Monetary Union

The European Union’s New Strategic Agenda for 2019-2024 and the Economic and Monetary Union Economy Near Us (XX)

The future of Europe is the major concern of the European institutions, mainly in the context of increasing nationalism and populism around the continent that culminated in Brexit. Long debates and many comments were had, but not so many new ideas. The problems with which our continent is struggling are not new and the quest for pragmatic solution is not at an end.

This was the background for the informal meeting of the EU-27 Heads of State or Government in Sibiu (May 9th 2019) where they outlined the strategic plans for the Union in the coming years and presented the new strategic agenda 2019-2024.

On June 20-21 2019, the European Council adopted the new strategic agenda 2019-2024 that defines the key areas for the next five years for the European Council. The European Council will discuss the follow-up to the Strategic Agenda in October 2019. This Strategic Agenda is the first step in a process that will be taken forward by the EU institutions and the Member States.

The strategic agenda focuses on four main areas:

  • protecting citizens and freedom;
  • developing a strong and vibrant economic base;
  • building a climate-neutral, green, fair and social Europe;
  • promoting European interests and values on the global stage.

Moreover, the strategic agenda identifies several ways for achieving these objectives. In the following, I will only discuss aspects regarding the economic area.

Within the area of developing a strong economic base, the new strategic agenda is taking into consideration actions such as:

  • deepening the Economic and Monetary Union;
  • completing the banking and capital markets union;
  • strengthening the international role of the euro;
  • strengthening the cohesion in the EU;
  • working on all aspects of the digital revolution and artificial intelligence: infrastructure, connectivity, services, data, regulation and investment;
  • reducing the fragmentation of European research, development and innovation activities;
  • ensuring fair competition within the EU and on the global stage.

These measures are considered to be crucial for achieving a strong economic base around the European Union and for strengthening the cohesion in the European Union.

The Economic and Monetary Union (EMU) comprises policies aiming to achieve an economic convergence among the Member States. The EMU set of policies refers to: Economic Union, Fiscal and Financial Union. In recent years, progress has been achieved in the areas of Economic Union and Fiscal Union. However, regarding the Financial Union (Single Capital Market, Banking Union) there were more debates than actions due to very different opinions on the subject at the political level.

In June 2019, the European Commission invited European leaders to:

  • reach an agreement on Budgetary Instrument for Convergence and Competitiveness. The aim is to agree on its size in the context of the Multiannual Financial Framework. While the instrument is meant to be operational in 2021, there is still nothing decided on issues such as governance, pre-allocations, distribution of funds across countries and co-financing rates.
  • finalise the changes to the Treaty establishing the European Stability Mechanism with a view to a swift ratification by the euro-area Member States, including an operational and effective common backstop, the provision of liquidity in resolution and active and effective precautionary instruments;
  • complete the Banking Union starting with political negotiations on the European Deposit Insurance Scheme;
  • accelerate progress on the Capital Markets Union and step up work to strengthen the international role of the euro.

Nonetheless, The European Council and the Euro Summit did not succeed to reach a political agreement on the issues on the agenda. Even though the European Council agreed that the European Union needs a strong European and Monetary Union it seems that having too many competing visions on how EMU should look and function is a major impediment in achieving this objective.

For example, France advocates for greater solidarity in sharing the risk across the Eurozone’s financial system, while Germany rejects the idea of wide-scale fiscal transfers among Member States and argue for risk reduction.

France goes further and proposes the creation of a common Eurozone budget and a Eurozone Finance Minister and Treasury. The Netherlands, an opponent of a common Eurozone budget, has indicated qualified support for the proposal, provided that strict conditions are met such as veto power for national capitals over where the money goes.

On the other hand, the issue of how the budget would be financed remains unsolved. A joint diplomatic note issued in April 2019 by Ireland, the Netherlands and three other Member States stated that the budget should not be financed by new taxes.

Moreover, all the discussion about the EMU are leaving outside a great part of the European Union – the states that are not part of Eurozone. This seems to contradict the need for strengthening the cohesion in European Union – an important area of the new Strategic Agenda 2019-2024.

In my opinion, the recently adopted Strategic Agenda 2019-2024 has little chance of success unless the political leaders decide to have a more “European” view as opposed to a nationalistic one. In other words, we need political leaders to think about a more integrated Europe where the interests of all states, included those that are not part of the Eurozone, are represented. It seems to me that we need to rethink the budgetary construction with a focus on convergence and cohesion, with policies designed to encourage the growth and jobs creation in all Member States. The Economic and Monetary Union should be designed to integrate all the Member State economies. Only more integration, convergence and cohesion can offer better risk-reduction, better shock absorption and better resource allocation at the European level.

The new Strategic Agenda 2019-2024, adopted in June 2019, is a strategic instrument that pegs the deepening the Economic and Monetary Union as a necessity. However, the political decisionmakers are failing, once again, to find the agreement needed to implement this agenda and its priorities. Moreover, I consider it of the utmost importance to take into account the interests of the Member States that are not yet part of the Eurozone, in order to strengthen the cohesion within the European Union. Unfortunately, it seems to me, that the Euro Summit on June 21st, 2019 was just another lost opportunity in finding the common way to implement the key measures identified in the Strategic Agenda 2019-2024. 

Photo credit: pxhere.com

 

 
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OEconomica No. 1, 2016