The present political uncertainty in Italy and a context of rising protectionism and Euroscepticism all seem to be shaping debate in the run-up to the next EU Summit in June, whose purpose is to strengthen the Economic and Monetary Union (EMU). As Eva Valle, Director of the Economic Office of the President of the Government, put it, “Progress towards greater fiscal and banking union is hindered by debates in which EU concepts are mixed up with EMU ones”. She made this observation during her discourse in the second session of a series of conferences organised by ESADE's Jean Monnet Chair in collaboration with Uría Menéndez and Fundación de Estudios Financieros, titled “The Future of the Economic and Monetary Union”. Valle also stressed that, “The Euro must be able to fend for itself by having its own mechanisms for strengthening fiscal and banking integration — something that will benefit both the Euro and the EU as a whole.”

David Vegara, ESADE professor and former Deputy Director of the European Stability Mechanism (ESM) concurred with Vega’s appreciation, noting that “EMU lacks the mechanisms to properly combine fiscal and monetary policies in the Euro Zone”. In the same vein, he went on to stress that, “It is vital to optimise EMU so that it can perform its stabilising function and ensure that the financial plight of one or more Member States does not overwhelm the system and spill over to other EU nations. It also needs to help countries tackle crises at the lowest cost possible”. Vegara considered that, “The fiscal channel is neither the only one nor the most important one for mitigating asymmetric shocks among countries in the context of the European Union”. He went on to conclude that, “A Banking Union is vital for it would provide greater financial integration and be a more powerful instrument than income and credit channels for absorbing the impact of such shocks”.

The ESADE professor also made a set of recommendations, such as: the creation of “a stabilisation mechanism, linked to unemployment insurance, that would not involve permanent transfers among countries”; “a Euro Zone budget complementing the stabilisation mechanism”; “unification of representation in international financial bodies” through a “Euro Zone Minister for Economics and Finance”. Vegara went on to stress that EMU needed to “function as a true crisis-management instrument, capable of providing financial help regardless of debt-restructuring issues” and to foster “the simplification of fiscal norms, set up a European fiscal authority and strengthen the powers of the European Commission”. He argued that “Citizens need to be made more strongly aware of the fact that the European Project is useful and directly boosts their welfare.”

The President of the Independent Authority for Fiscal Responsibility (AIReF), José Luis Escrivá, noted that “there are two contradictory priorities concerning EMU: risk reduction and risk-sharing.” It was, he said, “an asymmetric situation in which the priority must be to advance on the road to unification and to draw up a realistic, step-by-step approach that can convince sceptics. On the national level, this means highlighting successes and pursuing a vision over the medium term that restores credibility. On the European level, it means ditching impractical proposals and exploring intermediate solutions”.

Last but not least, Juan Luis Vega, Head of the Monetary Policy and Euro Zone Division of Banco de España [Spain’s Central Bank] noted that, “Budgetary restraint may help in designing a fiscal policy but it should not affect the quality of the institutional framework”. In his view, “There must be synergies between fiscal and monetary policy in the EMU. Such an approach would do much to lighten the excessive burden placed on monetary policy, which is currently the only effective way of stabilising aggregate demand — especially in situations where there is very little scope for further interest rate cuts”, he concluded.