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May 13, 2021

Barroso: Eurozone, in front of a systemic crisis

Bolder measures needed, growth better factored into economic governance.

European Commission President Jose Manuel Barroso has warned that the eurozone faces a “systemic crisis” that needs deeper integration to resolve, the BBC reports. He told the European Parliament in Strasbourg that further measures might be needed to tackle the debt crisis. “Without this increased integration, convergence and discipline, we will not be able to sustain a common currency,” he added. His comments came as figures showed eurozone inflation was stable at 3%. The rate of inflation across the 17-member zone in October remained unchanged from the month before, according to the EU statistics agency, as energy costs remained high.

Mr Barroso also warned that eurozone growth would be low and unemployment would remain at about 10% for the next two years. The European Commission president said deeper fiscal integration between eurozone members should not put the remaining 10 members at a disadvantage. “Reinforcing the governance of the euro is also reinforcing our union,” he added.

The majority of EP political group leaders warned that any Treaty change would need to carried out in an open manner, including national parliaments and the EP. European Council President Van Rompuy says euro zone should look again at automatic sanctions, voting power suspension. “Talk on a two tier Europe has been exaggerated. It is time to de-dramatise this.  It is true however to realise that it is those member states which are outside of the eurozone that have a derogation and not the other way round,” Van Rompuy mentioned, according to europarl.europa.eu. “Mr Van Rompuy needs to work much faster now.  When there is a fire you try to put it out quickly rather than analyse the situation,” EPP leader Joseph Daul said. On a multi-speed EU he said : “We need to include those member states which envisage joining the eurozone in the near future. In this sense we should go further on economic governance together with these countries.”

Socialist leader Martin Schulz said that Italy and Greece need investment and growth.  “This is what we should be discussing this morning. These countries are not only victims of excessive indebtedness but also of speculation.” Reacting to Van Rompuy he said: “The EP is not a think-tank but a source of solutions as can be evidenced by the adoption of the six pack legislation, rules on short selling etc.” Referring to the other 10 non-eurozone EU members, Barosso further suggest that most of them, almost all of them, have a vocation to join the euro. He also underligned, that future treaty changes would be needed to strengthen integration, despite opposition from countries including Britain. He said once this integration was achieved, it would be natural for the eurozone countries to issue debt together – what he called “stability bonds” or what the markets call eurobonds. “Such bonds could, if well designed, strengthen financial stability and fiscal discipline in the euro area,” said Mr Barroso. Germany, which has the lowest financing costs in the eurozone, fiercely opposes any issuing of joint debt. The Commission will present a proposal on such bonds later this month.

Wednesday morning MEPs discussed the immediate and medium term needs for stronger EU economic governance with European Council President Herman Van Rompuy, Europgroup President Jean-Claude Juncker and European Commission President José Manuel Barroso.

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