BRUSSELS (Reuters) - European Union leaders have given the bloc’s four most powerful officials a little over a month to come up with a clearer template for euro zone integration, a pitch to persuade voters and markets that the euro has staying power.
The four — European Commission President Jose Manuel Barroso, European Central Bank President Mario Draghi, Eurogroup Chairman Jean-Claude Juncker and European Council President Herman Van Rompuy — have no less a task ahead than spelling out where Europe is actually going.
“We have reached a point in which the process of European integration needs a courageous leap of political imagination in order to survive,” Draghi said on Thursday in the aftermath of an EU summit that was long on the need for unity and growth, but short on both details and agreement.
The four men, working in the shadow of the bloc’s worst financial crisis and under a growing threat of Greece failing to remain in the euro zone, are to report to an EU summit on June 28-29.
“The logic behind all this is that markets and global partners find it difficult to follow what we do on a daily basis, because they are uncertain about the long-term direction of the union,” said one senior euro zone official.
“It is about giving a sense of direction, a strategic objective or goal for various purposes - for citizens, for markets, for global partners,” the official said.
A popular backlash against austerity and reforms in debt-laden Greece, which threatens to force the country out of the euro, has made some investors doubt if the EU’s flagship economic project can hold together.
Euro zone leaders have repeatedly restated their commitment to the shared currency since the sovereign debt crisis began more than two years ago, but many investors remain skeptical because of conflict within the zone over the crisis response.
“Euro zone governments must define in a common and irreversible way their vision of the political and economic foundation that will support the euro,” Draghi said.
A plan for deeper economic integration would aim at making it clear that the euro zone was permanent. It could, in the end, lead to joint debt issuance by countries sharing the euro - a prospect markets and many euro zone governments would welcome.
“It is a way of saying that we should study and reflect on the features and design of an economic union that would make the joint issuance of debt rational,” the official said.
But rather than being a goal in itself, euro bonds would be the consequence of deeper economic integration - a process likely to take many years and entail big political hurdles, such as changes to the EU treaty. Yet no change was not an option.
“We have come to the limits of what can be done without a deeper reflection about the future of the European Union,” the official said.
Over the next weeks a team chosen by the four top officials will try to work out what “building blocks” are needed to achieve deeper integration. Officials said they were likely to include deeper fiscal policy coordination and integration and deeper advance coordination of major economic policy decisions.
There were also likely to be proposals on more cooperation on taxation and, to deal with financial sector problems, more pan-European supervision of banks - possibly an EU bank resolution scheme and possibly an EU deposit guarantee scheme.
Apart from reassuring markets with a long-term view, leaders also hope that once EU citizens know what the future holds, they could be more willing to accept sacrifices and reforms now.
“It will give some meaning to what governments are doing if they can also explain what it is that we are working for, what the direction is. Clearly this sense of direction is not there now,” the official said.
“People do not want to accept savings just because they are told so. They ask: ‘Why?’ It is not enough to say that this is because we have built up so much debt in the past years. There will also have to be a future that anchors expectations and explains why we do things,” the official said.
While there was agreement among EU leaders that deeper integration was a must, convincing voters on the project could be challenging.
Public opinion in countries like Germany, Finland, Slovakia and the Netherlands is against ideas that could, in the end, make them jointly responsible for the debts of less frugal members of the euro zone - as joint debt issuance would.
Therefore it was not clear if the integration vision to be discussed in June would explicitly mention euro bonds.
“Whether that is agreed already now ... is difficult to say. It is going to be quite sensitive and difficult for many,” the official said.
Reporting by Jan Strupczewski; additional reporting by Gavin Jones in Rome; editing by Rex Merrifield/Jeremy Gaunt