REPEAT: Rome Wants Pro-Growth EMU Reform, Target Growth, Jobs

Repeats Story Initially Transmitted at 09:28 GMT Dec 20/04:28 EST Dec 20

--Proposal Document Says Anti-Cyclical Stabilisation Scheme Needed

--Calls For Common Tax To Fund Migration Efforts

--Italy Says Risk-Sharing Key to Eurozone Stability

By Silvia Marchetti

     ROME (MNI) - The Italian government has proposed an ambitious pro-growth

reform of the European Monetary Union that can pave way to increased

convergence. In a recent 15-page position paper for eurozone members, Rome

outlined its priorities in the ongoing eurozone reform debate. Above all, it

believes that new European-level governance should target growth, employment and

investment. 

     "In order to ensure that prosperity is once again broad-based and all

Europeans may benefit from it, all Member States must improve their ability to

adjust to shocks, including through greater risk-sharing," said the report.

     According to one Italian government source, the progress of the union and

the eurozone "go hand in hand and must be brought forth in a symmetric and

comprehensive way, avoiding that parts of the reform are implemented at

different moments". 

     Among the factors needed to strengthen the EU governance and complete the

eurozone are the creation of a central budget to co-fund Europe-wide public

spending on items such as defence and migration, the completion of the banking

union and the introduction of a "common anti-cyclical stabilisation mechanism

that would act as shock absorber,"  the government source said.

     --RAINY-DAY FUND

     This could be via the creation of "a rainy day fund", triggered into use by

cyclical spikes in unemployment, in which the transfer of resources to ailing

countries "would be proportional to the intensity of the shock" and repaid over

time as form of interest-free loan 

     "Because the mechanism is activated in response to cyclical movements only,

and shocks tend to be evenly distributed among countries over the long term,

there will be no countries that are net beneficiaries or net contributors for

significant amounts over the long term," explains the document. 

     Italy also proposes to deal with "macroeconomic imbalances in a symmetric

and more effective way" so as to "equally" handle both excessive public debts

and excessive trade surpluses of member states, both of which are seen as

harmful to the economy. 

     A new "fiscal pillar" is required to strengthen the union's governance, but

says flexibility should become a rule, and not be a one-off measure hard to win

     --PERMANENT JUNCKER PLAN

     Rome is also calling for a coordinated corporate taxation policy to support

"a permanent Juncker plan focused on innovation-driven investments". 

     The reforms implemented at EU level to save-off future crises to date,

including the European Stability Mechanism (ESM), are encouraging but partial

steps, insufficient to effectively endow the union with the much needed tools to

steer convergence, growth and resilience to shocks, according to the Italian

document.

     Italy sees fiscal union as paramount, to be managed by an EU finance

minister who must, however, be "subject to democratic and parliamentary control"

(seem MNI story from Dec 19: goo.gl/iCRHdT ). 

     Increased degrees of fiscal integration towards a genuine fiscal union will

imply significant transfers of sovereignty towards the establishment of a

political union, adds the report. 

     Rome also suggests new forms of common taxation should be investigated,

including revenues from carbon and energy taxation, and a visa tax ring-fenced

for migrant-related expenditure -- a thorny issue for Italy. 

     In order to proceed with "parallel risk sharing and reduction", the Italian

government proposes speeding up the banking union, completion with the

introduction of the common deposit insurance scheme and a common backstop, all

to be run by the ESM. 

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com