A new year is upon us and with it a new era for monetary union in the EU is about to start. Despite the Cassandras’ wishful thinking this new era will not bring the destruction of the single currency but it will usher in the beginning of the next phase of monetary integration with steps towards closer economic and fiscal co-ordination in the Eurozone and the EU.
The Economic and Monetary Union (EMU) is one of the most ambitious and at the same time successful undertakings in the EU’s history. In the short time the single currency has been around it has established itself as a global reserve currency, second only to the dollar, it has offered huge benefits to Eurozone consumers and business alike, removing exchange rate uncertainties and providing a framework to facilitate the advantages of the EU’s Single Market, not least in the financial services sector which benefited significantly from the creation of a common market with a common currency.
Those success were taken for granted until the credit crunch hit and reminded us all exactly how integrated the EU’s economies, financial markets and trade sectors really are. The crisis spread through the EU exactly because of the level of integration achieved between Member States. So unless we prefer to undo the single market and the benefits it has produced through intra-EU trade we must be prepared to strengthen the eurozone and the EU, the single currency and the single market, if we are to protect European economies from future crisis.
So, despite its devastating effects for some European economies, this crisis does not constitute the end of the eurozone. On the contrary it is a sign that the time has indeed arrived to move forward to the next level of monetary union by adopting the policies that will generate the necessary degree of budgetary and fiscal integration needed to make EMU complete. The EU Council and the European Commission are fully aware of that and for months now have been working on putting in place the necessary structures to strengthen European economic governance. Proposals currently on the table are a step to the right direction, but more needs to be done. The Eurozone’s and the EU’s economies are integrated to such a degree that brave decisions need to be taken and no measures should be ruled out. Our sovereignty must be pulled further if it is to be enhanced. Fiscal integration and closer budgetary coordination is the only way to ensure that Europe’s economies are shielded from future financial crisis like the one that engulfed the banking sector in the past few years.
It is imperative that the UK participates fully in the next stage of European integration. The Irish banking and sovereign debt crisis has clearly demonstrated that the UK and eurozone economies and financial services sectors are integrated to such a degree that we can not afford to stand by idly, which is exactly why the Government took the decision to participate in the measures put in place to assist the Irish economy. But the UK involvement in EU economic and monetary integration can not be limited just to contributing financially to the eurozone’s support mechanism. That will relegate us to Norway’s EEA status, which even though contributes to the EU budget has no say in the decision-making process that determines how that budget is spend. The eurozone is so important for the European and global economy that the effects of decisions made there are felt beyond its borders. The UK must participate fully in the decision-making structures that govern the eurozone, exactly because the decisions made in the eurozone affect the British economy so much. Standing by and watching others make decisions on our behalf is the worst surrender of sovereignty possible. If that means adopting the single currency then be it, we are already part of the eurozone, we may as well participate in the decision-making structures that govern it.