Latest Quarterly Report called for further integration, in order to safeguard stability and growth
by Emanuele Bonini
Economic recovery in the Euro area is at stake, according to the European Commission. This in not the only problem for the single market, since the incomplete integration makes it weak and more unprepared to major challenges. The Quarterly Report on the EU member States with single currency published yesterday recognised that «the downside risks to the outlook are considerable». Both internal and external uncertainties are behind these risks. On one hand, on the foreign side weaker growth in emerging market economies and stronger geopolitical tensions «could affect Euro area economies more negatively than expected», according to the analysis. On the other hand, on the domestic side «the probably most important policy risk surrounding our forecast has materialised, namely the UK's vote to leave the EU», even if it's to early to say what can really happen. Brexit impact on the economic outlook has to be carefully assessed.
The situation appears to be less optimistic than expected. According to the financial services of the European Commission, in this environment of lasting uncertainty, the Euro area «is not yet fully prepared to cope with large economic shocks». In other words, EU member States using the single currency have not the great resilience they believe, and this is because a true monetary union is not there yet. In fact a major reason of this vulnerability is that «although domestic tax and benefits systems are quite extensive within Euro area Member States, the single currency area lacks an appropriate degree of cross-border risk sharing», wrote the Director-General for Economic and financial affairs at the European Commission, Marco Buti. «Further integration» is therefore needed. In fact, «elements of risk sharing contribute to a process of risk reduction», was stressed in the EU Commission document.
The European Commission warned that current situation «highlights the need to re-think the balance of risk sharing mechanism», which is something not working properly because a true solidarity among the EU Member States is still envisaged by certain governments, notably the German one. In name of preserving tax-payers' money from possible crisis (this is the German refrain), other country are requested to restructure their financial systems in order to reduce the exposure to economic troubles. This is the so principle of risk reduction. In order to overcome difficulties and to better the Euro area for future economic shocks, «we need to work towards a more suitable level and balance of risk sharing and risk reduction», pointed out the Quarterly Report on the Euro area. All that «without prejudice to the importance of risk reduction», of course. The path to follow has been clearly shown. Now it is up to the Member States to move towards that direction.
Economic recovery in the Euro area is at stake, according to the European Commission. This in not the only problem for the single market, since the incomplete integration makes it weak and more unprepared to major challenges. The Quarterly Report on the EU member States with single currency published yesterday recognised that «the downside risks to the outlook are considerable». Both internal and external uncertainties are behind these risks. On one hand, on the foreign side weaker growth in emerging market economies and stronger geopolitical tensions «could affect Euro area economies more negatively than expected», according to the analysis. On the other hand, on the domestic side «the probably most important policy risk surrounding our forecast has materialised, namely the UK's vote to leave the EU», even if it's to early to say what can really happen. Brexit impact on the economic outlook has to be carefully assessed.
The situation appears to be less optimistic than expected. According to the financial services of the European Commission, in this environment of lasting uncertainty, the Euro area «is not yet fully prepared to cope with large economic shocks». In other words, EU member States using the single currency have not the great resilience they believe, and this is because a true monetary union is not there yet. In fact a major reason of this vulnerability is that «although domestic tax and benefits systems are quite extensive within Euro area Member States, the single currency area lacks an appropriate degree of cross-border risk sharing», wrote the Director-General for Economic and financial affairs at the European Commission, Marco Buti. «Further integration» is therefore needed. In fact, «elements of risk sharing contribute to a process of risk reduction», was stressed in the EU Commission document.
The European Commission warned that current situation «highlights the need to re-think the balance of risk sharing mechanism», which is something not working properly because a true solidarity among the EU Member States is still envisaged by certain governments, notably the German one. In name of preserving tax-payers' money from possible crisis (this is the German refrain), other country are requested to restructure their financial systems in order to reduce the exposure to economic troubles. This is the so principle of risk reduction. In order to overcome difficulties and to better the Euro area for future economic shocks, «we need to work towards a more suitable level and balance of risk sharing and risk reduction», pointed out the Quarterly Report on the Euro area. All that «without prejudice to the importance of risk reduction», of course. The path to follow has been clearly shown. Now it is up to the Member States to move towards that direction.
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