Completing the Euro. A road map towards fiscal union in Europe

This report is the result of the work of the 'Tommaso Padoa-Schioppa Group', established by Notre Europe to reflect on the future of the Economic and Monetary Union. After a thorough analysis of the roots of the crisis, the report identifies three major challenges the euro area will have to solve in the coming decade:

+ Preventing large and persistent EMU heterogeneities
+ Making the EMU fiscal framework more sustainable and resilient to 'self-fulfilling solvency' crises
+ Breaking the nexus between national banks and national sovereigns with the establishment of an appropriate EMU framework for banking supervision and resolution.

To solve these challenges, the report proposes:

+ Completing and fostering the single market in order to allow the real exchange rate channel to work more effectively
+ Rebalancing fiscal rights and fiscal duties in the common currency area, in particular through the creation of a European Debt Agency which would serve as normal financing instrument for an amount of 10% of GDP to all countries but would also ensure adequately priced access to sovereign financing in crisis times
+ Creating an automatic cyclical stabilization fund outside the EU budget, to alleviate the effects of endogenously-generated EMU cyclical divergences
+ Creating an euro area banking union, composed by a euro area banking supervision authority with micro-prudential powers and a euro area agency inspired by the US Federal Deposit Insurance Corporation (FDIC), combining the function of a banking resolution agency and a deposit guarantee scheme.

• Primary Source

Notre Europe: Completing the Euro - A road map towards fiscal union in Europe, 2012 http://www.notre-europe.eu/fr/axes/competition-cooperation-solidarite/travaux/publication/completing-the-eurobra-road-map-towards-fiscal-union-in-europe/

Notre Europe: A "federalism by exception" for the Eurozone. Report of a follow-up conference, September 2012 http://www.eng.notre-europe.eu/011-14397--A-federalism-by-exception-for-the-Eurozone.html

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