BRUSSELS (MNI) – Below is the verbatim text of a report by EU
Council President Herman Van Rompuy on a “vision” for the future of the
Eurozone, including steps towards a banking and fiscal union.

The report, created in collaboration with the presidents of the
European Commission, the European Central Bank and the Eurogroup, was
delivered to EU heads of state and government ahead of their summit
meeting later this week:

“It is my pleasure to hereby transmit to you the report which I
prepared in close cooperation with the Presidents of the Commission, the
Eurogroup and the European Central Bank.

This report sets out a vision for the future of the Economic and
Monetary Union and how it can best contribute to growth, jobs and
stability. The report proposes to move, over the next decade, towards a
stronger EMU architecture, based on integrated frameworks for the
financial sector, for budgetary matters and for economic policy. All
these elements should be buttressed by strengthened democratic
legitimacy and accountability.

This report is not meant to be a final blueprint: it identifies the
building blocks and suggests a working method. I do however expect to
reach a common understanding amongst us on the way forward for the EMU
at our meeting at the end of the week. The current situation requires
careful consideration of future work that will be necessary over the
medium to long term. I am prepared to continue working, together with
the Presidents of the Commission, the Eurogroup and the European Central
Bank, to submit to the December 2012 European Council detailed proposals
for a stage-based process towards a genuine Economic and Monetary Union,
closely associating the Member States all along.

I am looking forward to our discussions on Thursday evening and
Friday.

I. CONSOLIDATING THE ECONOMIC AND MONETARY UNION

The economic and monetary union (EMU) was established to bring
prosperity and stability across Europe. It is a cornerstone of the
European Union. Today the EMU is facing a fundamental challenge. It
needs to be strengthened to ensure economic and social welfare.

This report, prepared by the President of the European Council in
collaboration with the President of the Commission, the President of the
Eurogroup and the President of the European Central Bank, aims at
developing a vision for the EMU to ensure stability and sustained
prosperity. It does so by proposing a strong and stable architecture in
the financial, fiscal, economic and political domains, underpinning the
jobs and growth strategy.

CHALLENGES

An effective vision has to confront the long-term challenges that
the EMU faces. The euro area is diverse and policy-making at the
national level is the most effective method for many economic decisions.
Yet, national policies cannot be decided in isolation if their effects
quickly propagate to the euro area as a whole. Therefore, such national
policies must reflect fully the realities of being in a monetary union.
Maintaining an appropriate level of competitiveness, coordination and
convergence to ensure sustainable growth without large imbalances is
essential. This should allow for the appropriate policy mix with the
single monetary policy in pursuit of price stability.

But to ensure stability and growth in the euro area, Member States
have to act and coordinate according to common rules. There have to be
ways on ensuring compliance when there are negative effects on other EMU
members. This is necessary to guarantee the minimum level of convergence
required for the EMU to function effectively.

Overall, closer EMU integration will require a stronger democratic
basis and broad support from citizens. For this reason, it is essential
that already the process towards realising this vision is based on wide
consultation and participation. Integration and legitimacy have to
advance in parallel.

The vision for the future of EMU governance laid out in this report
focuses on the euro area Member States as they are qualitatively
distinct by virtue of sharing a currency. Nevertheless, the process
towards deeper economic and monetary union should be characterised by
openness and transparency and be in full compatibility with the single
market in all aspects.

VISION

The report proposes a vision for a stable and prosperous EMU based
on four essential building blocks:

a.) An integrated financial framework to ensure financial stability
in particular in the euro area and minimise the cost of bank failures to
European citizens. Such a framework elevates responsibility for
supervision to the European level, and provides for common mechanisms to
resolve banks and guarantee customer deposits.

b.) An integrated budgetary framework to ensure sound fiscal policy
making at the national and European levels, encompassing coordination,
joint decision-making, greater enforcement and commensurate steps
towards common debt issuance. This framework could include also
different forms of fiscal solidarity.

c.) An integrated economic policy framework which has sufficient
mechanisms to ensure that national and European policies are in place
that promote sustainable growth, employment and competitiveness, and are
compatible with the smooth functioning of EMU.

d.) Ensuring the necessary democratic legitimacy and accountability
of decision-making within the EMU, based on the joint exercise of
sovereignty for common policies and solidarity.

These four building blocks offer a coherent and complete
architecture that will have to be put in place over the next decade. All
four elements are necessary for long-term stability and prosperity in
the EMU and will require a lot of further work, including possible
changes to the EU treaties at some point in time.

II. KEY BUILDING BLOCKS

1. An integrated financial framework

The financial crisis has revealed structural shortcomings in the
institutional framework for financial stability. Addressing these
shortcomings is particularly important for the euro area given the deep
interdependences resulting from the single currency. However, this needs
to be done whilst preserving the unity and integrity of the single
market in the field of financial services. Therefore, an integrated
financial framework should cover all EU Member States, whilst allowing
for specific differentiations between euro and non-euro area Member
States on certain parts of the new framework that are preponderantly
linked to the functioning of the monetary union and the stability of the
euro area rather than to the single market.

Building on the single rulebook, an integrated financial framework
should have two central elements: single European banking supervision
and a common deposit insurance and resolution framework.”

MORE

[TOPICS: M$X$$$,MGX$$$,M$$CR$,MT$$$$]