EUROPE needs to embrace fiscal union to save the euro, according to European Commission (EC) president José Manual Barroso.
Addressing the European Parliament yesterday, Barroso declared: “We need to complete our monetary union with an economic union. We need to achieve the tasks of Maastricht. It was an illusion to think that we could have a common currency and a single market with national approaches to economic and budgetary policy.”
He added that the EC is working on a scheme to “deepen economic coordination and integration”, in which he wants the European Central Bank (ECB) to take a central role. And he said that “joint issuance” of euro-bonds to integrate governments’ treasuries entirely “will be seen as a natural and advantageous step for all”.
However, European leaders are embroiled in a row over the terms of Greece’s second €109bn bailout before it has yet been fully ratified.
Economists are pushing for leaders to boost the loss suffered by private holders of Greek debt from a 50 per cent haircut, or write-down, on their bonds to 90 per cent – far beyond the terms of the deal struck in July.
German Chancellor Angela Merkel had suggested yesterday that the terms of the agreement could be changed, but the German parliament will vote on the original deal this morning.
An EC spokesperson chastised ministers for suggesting changes. “If we try to be predictable in our decisions and project confidence, it’s not helpful... to hear it could change,” he said.
Meanwhile, the troika – the ECB, EC and IMF – arrived back in Athens yesterday to resume their surveillance of the country’s implementation of budget cuts it must make to get hold of its next €8bn in aid.
And Slovakia, which is the euro member state most likely to vote down Greece’s second bailout, could try to bring its vote forwards after three parties in its governing coalition called for parliament to vote before mid-October.