As European partners remain disunited on the way forward to strengthen the eurozone, ECB President Mario Draghi made a wholehearted defence on Monday (28 January) of the need to act together to complete the economic and monetary union and increase the influence of the common currency abroad.
In his final appearance before the European Parliament’s Committee on Economic and Monetary Affairs before May’s EU elections, Draghi argued that a united position inside the euro area would not only help to increase the international role of the euro but would be instrumental to retain our sovereignty.
“Standing together within the economic and monetary union allowed us to retain sovereignty that would otherwise be lost by individual countries in a highly integrated world economy,” he stressed.
Looking at the outstanding reforms in the banking union and the capital markets union to bolster the euro region, the central banker said that “our togetherness represents a unique competitive advantage, and we should capitalise on this.”
Germany has become almost the only obstacle to complete the banking union by opposing a European-wide insurance to protect savers.
Member states are more split with regards to introducing a eurozone budget, a controversial moev that could represent the first step towards a fiscal union.
Draghi said that achieving a series of reforms to bolster the euro area, including a common fiscal instrument to cushion sudden economic shocks, is not “idealistic, nor utopian if we work together”.
But in order to regain the trust in the economic and monetary union, he recommended making the framework more effective in ensuring sound policy-making at the national level.
His comments echoed other proposals to strengthen the application of the Stability and Growth Pact, the EU’s fiscal rules.
Italy and France have in recent months tested the European Commission’s willingness to apply the deficit and debt limits more forcefully.
In his speech before the Parliament’s plenary on the occasion of the 20th anniversary of the euro, the importance of strengthening the togetherness in the union was already Draghi’s main message.
“Today most challenges are global and can be addressed only together. It is this ‘togetherness’ that magnifies the ability of individual countries to retain sovereignty over the relevant matters, sovereignty that would otherwise be lost in this global world”.
Stronger international role
As the EU is discussing ideas to increase the influence of the common currency abroad, Draghi insisted on the benefits of acting together also on this front.
“In a world with deep economic and financial interlinkages, international cooperation is essential and we can more effectively promote European ideas and interests by speaking together,” he said.
Draghi admitted that “since the global financial and euro area debt crises, however, the euro’s international role seems to have gradually eroded.”
“While its importance as the currency of invoice for international trade transactions has remained broadly stable, its role in global foreign reserves and global debt markets has declined,” he added.