"We must keep the momentum on the banking union," President of the European Council Herman Van Rompuy said on Monday, adding that, “if anything, the recent uncertainties around Cyprus have underlined the need not only for a single supervisor but also for a strong and effective single resolution mechanism.”
“Only with a complete banking union will we be able to break the vicious circle between sovereigns and banks, that has haunted us since the beginning of the crisis,” Rompuy said in his closing keynote speech at the Brussels Think Tank Dialogue.
“We are working on this next phase already, with Commission proposals for a single resolution mechanism. We can`t afford to have a half-built system. Single supervision and single resolution go together, you can`t have one without the other. We can build both within our current Treaty. Which is good, since we do not have the luxury of time,” Rompuy said.
Beyond the banking union, he added, “the broader work towards a genuine Economic and Monetary Union must continue. I`ll be reporting back to leaders in June on a number of issues, including ex-ante coordination of economic reforms and reform contracts. That June discussion will not be the end of the process.”
He said that these changes in the Economic and Monetary Union will have implications in terms of democratic accountability and political legitimacy.
“Europe can live with tensions, deal with them; at times, we`re even rather good at it! By its nature the crisis has required a combination of European and national responses. This invites us to carefully examine the question of legitimacy,” Rompuy added.
“There would be much to say about Cyprus in this respect. Its people needed a say, but clearly there was a pan-European dimension too,” he noted, adding that “in such cases, the rule of thumb that accountability should lie at the level at which decisions are ‘taken and implemented’ does not provide all the answers.”
As regards the Economic and Monetary Union he said that this is one area “where leaders had to come-to-terms with the fact that, to overcome immediate problems, we needed to go beyond short-term repairs and take a long term view. We have to fix the systemic flaws in the EMU`s architecture,” he noted.
Rompuy also stressed the need to “unlock the biggest obstacles to recovery. I`m especially concerned about financial fragmentation and difficult access to credit in the hardest-hit countries. High private sector lending spreads are taking a toll on growth; it`s holding back the very companies that should be driving the recovery,” he said.
He stressed that “we need to restore normal lending in these countries, especially for SMEs. Part of the answer lies in setting up the banking union of course. But even beyond that, more will be needed to get credit flowing again, possibly through specific action involving all EU institutions,” he said.
As he noted, “here are ‘time lags’ – between the return of stability and that of growth, and the return of growth and that of employment.”
“We must shorten those time lags. This means we need more immediate measures to directly support job creation and economic activity. Initiatives like the swift refocusing of structural funds last year, or the Youth Employment initiative in the EU budget can make a difference,” he said.
“But our common budget cannot solve it all, that’s why it’s so important that governments build on this with specific initiatives, like some already do,” Rompuy noted.
