The recent euro crisis and the fear of a British exit from the European Union have again added impetus to demands for increased levels of member state cooperation in the eurozone.
Central banks in Germany and France published a joint statement a few weeks ago in which they called on the eurozone to press ahead with structural reforms and closer integration to deliver sustainable growth. More specifically, the bank heads called for the creation of a common finance ministry that would provide the union with stronger decision-making clout.
The idea of such a ministry was floated already during the sovereign debt crisis which peaked in 2012, when five eurozone governments ran the risk of bankruptcy. The European Union was forced to fund bailouts worth hundreds of billions of euros for Greece, Ireland and Portugal.
Avoiding future bailouts
In June 2015, a team led by EU Commission President Jean-Claude Juncker prepared a report on the future of the eurozone, which included steps towards a deeper monetary union. The report said that a European Fiscal Board needed to be created by the year 2025.
Vice-President for the Euro Valdis Dombrovskis said already last October that the Commission was willing to move rapidly towards strengthening the Economic and Monetary Union (EMU), and stage one of a three-stage process has already been launched.
In addition to the formation of a common finance ministry, the second stage outlines far-reaching actions to make the convergence process more binding, with commonly agreed benchmarks that would likely require changes of a legal nature.
Stubb: No common fiscal oversight
A deeper monetary union is a difficult issue for Finland’s current centre-right coalition government. Finance Minister Alexander Stubb has made it no secret that he is a strong supporter of the common currency, but he is still tentative about introducing a joint eurozone financial advisory – at least not yet.
“I think it is still too premature. I don’t see a real need for it at the moment,” Stubb said on Sunday.
Stubb points out that talk about a common eurozone finance ministry is highly reminiscent of earlier plans to instate an EU Representative of the Union for Foreign Affairs and Security Policy, a position since held by Catherine Ashton and Federica Mogherini.
“We have a Eurogroup President and actually two Commissioners in the EU Commission that handle eurozone matters, and this is a good model to work with at this point,” Stubb said.
The Finance Minister says Finland’s position on intensifying eurozone integration is “cautiously optimistic, if it proceeds step by step in a very pragmatic fashion and doesn’t take any big leaps towards a shared economic policy.”
Finland as an observer
Prime Minster Juha Sipilä’s government is not ready to put a seal of approval on deeper cooperation, as its three-party coalition is itself divided over its European policy. For this reason, it sees no need to reach a rush decision on the matter.
The first stage of the deeper monetary union is nevertheless set to enter into force already in June 2017. The most problematic proposal in this first stage for Finland is the idea of a common deposit guarantee scheme. Implementation of the scheme would require all of the eurozone countries to incorporate a EU directive on bank recovery and resolution into their national law.
This common law would be critical to the success of monetary union because it makes bank shareholders, bond holders and even large depositors liable for the bank's losses before any public money is spent to save the institution.
Come together, but not right now
Finland has chosen to watch the EMU integration efforts from the sidelines, although Stubb says he has tried to maintain an active role.
“I have personally tried to be as active as I can in the development of the Eurogroup and I have spoken openly about what kind of measures should be brought forward,” Stubb said.
Stubb says Finland’s government pursues a pragmatic and practical agenda in the eurozone, and emphasizes that the government programme supports stability of the monetary union.
“European integration is progressing in intervals and we have witnessed as the euro community has grown closer. Now we have to consider how our economic policies can be better coordinated,” he said.
Stubb says efforts to build a common EU banking union are well on their way, with two-thirds of the work now done and capital markets being created as we speak.
“Actually, when it comes down to it, the eurozone has come together more in the last six years than it has in its entire existence.”