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Free AccessREPEAT: 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
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.