BRUSSELS (MNI) – The 27 heads of state and government of the
European Union released the following statement early Friday morning on
steps needed to complete Europe’s Economic and Monetary Union:

1. In the light of the fundamental challenges facing it, the
Economic and Monetary Union needs to be strengthened to ensure economic
and social welfare as well as stability and sustained prosperity.

2. Following the interim report presented by the President of the
European Council in close collaboration with the Presidents of the
Commission, the Eurogroup and the European Central Bank (ECB), informal
consultations will continue with Member States and the European
Parliament on the different issues to be explored. The European Council
looks forward to a specific and time-bound roadmap to be presented at
its December 2012 meeting, so that it can move ahead on all essential
building blocks on which a genuine EMU should be based.

3. The process towards deeper economic and monetary union should
build on the EU’s institutional and legal framework and be characterised
by openness and transparency towards Member States which do not use the
single currency and by respect for the integrity of the Single Market.
The final report and roadmap should include concrete proposals for how
to achieve this.

4. We need to move towards an integrated financial framework, open
to the extent possible to all Member States wishing to participate. In
this context, the European Council invites the legislators to proceed
with work on the legislative proposals on the Single Supervisory
Mechanism (SSM) as a matter of priority, with the objective of agreeing
on the legislative framework by 1 January 2013. Work on the operational
implementation will take place in the course of 2013. In this respect,
fully respecting the integrity of the Single Market is crucial.

5. There is a need to ensure a clear separation between ECB
monetary policy and supervision functions, and the equitable treatment
and representation of both euro and non-euro area Member States
participating in the SSM. Accountability takes place at the level at
which decisions are taken and implemented. The SSM will be based on the
highest standards for bank supervision and the ECB will be able, in a
differentiated way, to carry out direct supervision. It will also be in
a position to use the effective powers conferred on it by the
legislation as soon as it comes into force. In addition, it is of
paramount importance to establish a single rulebook underpinning the
centralised supervision.

6. It is important to ensure a level playing field between those
Member States which take part in the SSM and those which do not, in full
respect of the integrity of the single market in financial services. An
acceptable and balanced solution is needed regarding changes to voting
modalities and decisions under the European Banking Authority (EBA)
Regulation, taking account of possible evolutions in the participation
in the SSM, that ensures nondiscriminatory and effective decision-making
within the Single Market. On this basis, the EBA should retain its
existing powers and responsibilities.

7. The European Council calls for the rapid adoption of the
provisions relating to the harmonisation of national resolution and
deposit guarantee frameworks on the Commission’s legislative proposals
on bank recovery and resolution and on national deposit guarantee
schemes. The European Council calls for the rapid conclusion of the
single rule book, including agreement on the proposals on bank capital
requirements (CRR/CRD IV) by the end of the year.

8. In all these matters, it is important to ensure a fair balance
between home and host countries.

9. The European Council notes the Commission’s intention to propose
a single resolution mechanism for Member States participating in the SSM
once the proposals for a Recovery and Resolution Directive and for a
Deposit Guarantee Scheme Directive have been adopted.

10. The Eurogroup will draw up the exact operational criteria that
will guide direct bank recapitalisations by the European Stability
Mechanism (ESM), in full respect of the 29 June 2012 euro area Summit
statement. It is imperative to break the vicious circle between banks
and sovereigns. When an effective single supervisory mechanism is
established, involving the ECB, for banks in the euro area the ESM
could, following a regular decision, have the possibility to
recapitalize banks directly. Integrated budgetary and economic policy
frameworks and democratic legitimacy and accountability

11. The European Council invites the legislators to find an
agreement with a view to adopting the “two-pack” by the end of 2012 at
the latest. This is a key piece of legislation necessary for the
reinforcement of the new economic governance in the EU, alongside the
reinforced Stability and Growth Pact, the Treaty on Stability,
Coordination and Governance (TSCG) and the “sixpack”. It calls on
national authorities and European institutions to implement all of these
fully in accordance with their roles under the EU Treaties. Related to
the ongoing regulatory work in the EU banking sector, the European
Council takes note of the proposals of the high level expert group on
the structure of the EU banking sector, which the Commission is now
examining, including their possible impact on the objective of
establishing a stable and efficient banking system.

12. An integrated budgetary framework is part of an economic and
monetary union. In that context, further mechanisms, including an
appropriate fiscal capacity, will be explored for the euro area. The
process of exploration will be unrelated to the preparation of the next
Multiannual Financial Framework.

13. The smooth functioning of EMU calls for stronger and
sustainable economic growth, employment and social cohesion and requires
stronger coordination, convergence and enforcement of economic policy.
In this respect, the idea of the euro area Member States entering into
individual arrangements of a contractual nature with the EU institutions
on the reforms they commit to undertake and on their implementation will
be explored. Such arrangements could be linked to the reforms identified
in the country-specific recommendations adopted by the Council and build
on EU procedures.

14. Governance within the euro area should be further improved,
building on the TSCG and taking into account the euro area Summit
statement of 26 October 2011. Ways to ensure that all planned major
economic policy reforms are discussed ex ante and, where appropriate,
coordinated within the framework of the EU’s economic governance, in
line with Article 11 of the TSCG, should be explored by participating
Member States. The euro area Heads of State or Government shall adopt
rules of procedure for their meetings.

15. Strong mechanisms for democratic legitimacy and accountability
are necessary. One of the guiding principles in this context is to
ensure that democratic control and accountability take place at the
level at which decisions are taken and implemented. In this spirit, ways
to ensure a debate in the context of the European Semester, both within
the European Parliament and national parliaments, should be explored. In
this respect, the European Council notes the intention of the Member
States parties to the TSCG to improve the level of cooperation between
national parliaments and the European Parliament, building on Article 13
of the TSCG and Protocol 1 to the TFEU.

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