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At the end of May, the European Commission presented one of its key reflection papers from a whole series covering a wide range of topics - from common defence to globalisation. Word is about the document on the future of the euro area. The European Commission is of the opinion that now is the time to continue with the completion of the Economic and Monetary Union (EMU), and so it puts back on the table some of the already familiar ideas for the creation of a euro area minister, a European Monetary Fund, who will be the head of the Eurogroup and how should this informal grouping work, and also the idea of ​​something similar to Eurobonds, but not exactly, called a European safe asset in the document. 

euinside sent out a questionnaire to member states regarding the document, which included the following questions: 

- What is your country's opinion on further enlargement of the EMU to include those countries which are obliged by their accession treaties to join? When should they do this? In this respect, what is your country's view on convergence criteria - which of the three models presented by the Commission reflects the best your country's views - convergence of the standard of living; the Maastricht criteria; or convergence of business cycles?

- What is your country's opinion on the idea for a European Safe Asset?

- Do you agree the Eurogroup should be more transparent and the dialogue with European Parliament and the Commission formalised?

- How does your country view the idea the future minister of finance of the eurozone to be both member of the Commission and chair of the Eurogroup/ECOFIN?

- What is your view of the idea for a euro area budget, a European Monetary Fund and a Rainy Day Fund?

Not all member states were prepared to answer. Some are still analysing the Commission document, like Germany for example, which has set up a special department in the Ministry of Finance with the task of participating in this process and expanding the discussion, so there is still no response from Berlin at this stage. However, France and Germany are expected to come up with a joint document on the subject in mid-July, which will represent the vision of the two countries about the future of the euro area. Many of the member states are waiting for this document or the elections in Germany to announce their position. Others are sceptical about the EC paper and think it is better to work actively on the old ideas, instead of coming up with new ones. It is no surprise that this is the majority of Nordic states. 

Finland, for example, wants the euro area to continue developing, as it believes the euro to be a great success. At the same time, however, the country is of the opinion that everything that has been agreed earlier should be completed first, such as reducing risks in banks. In addition, Helsinki is concerned that some euro area countries could hide behind collective responsibility and not carry out the necessary reforms. According to the prime minister of Finland, discussions on the future of the euro area are easier than talks on reforms at home. 

The most important thing to The Netherlands is economic convergence. This means that before discussing safe assets, a euro area minister or a European Monetary Fund, work is needed on the convergence of European economies. For the Netherlands, it is also very important to work first on implementing the already agreed banking union and all other commitments. Generally speaking, the Netherlands believes that it is best to focus efforts on overdue and imminent things before thinking about long-term prospects. A permanent Eurogroup president (currently the rotating position is occupied by former Dutch Minister of Finance Jeroen Dijsselbloem) is such a long-term issue. The Netherlands recommends that everyone focus on the implementation of structural reforms, strict control over national budgets and the Stability and Growth Pact, and believes that these will remain being the main priorities in the foreseeable future. 

Estonia, which took over the presidency of the Council of Ministers on July 1, also believes that it is best that before starting to think about building new institutions it is realised that the deepening of integration in the euro area depends to a large extent on the overall ability to observe the rules. The full potential of the Stability and Growth Pact and the European Semester will strengthen economic convergence and reduce imbalances, is Tallinn's point of view. According to another small euro area country that wishes not to be quoted at this stage, the euro area needs mechanisms to share the risks of shocks, but at the same time it is necessary to strike the right balance between sharing and reduction of risks. 

To the country in question, at this stage, the most important model of economic convergence is convergence of business cycles, so emphasis should be placed on the convergence of the structure of economies (labour and product markets). This country supports the creation of a European safe asset and believes that the work of the Eurogroup should be more transparent, although it recalls that this is already being worked on by holding public hearings of the Eurogroup president in the European Parliament and there are already minutes of meetings being published. The country also supports the creation of a fiscal capacity (budget) of the euro area, as it believes that, at this stage, member states do not have enough instruments to deal with large asymmetric shocks.

The moral hazard issue can be resolved by making access to such a budget conditional upon implementation of structural reforms and compliance with fiscal rules. To this country, the European Monetary Fund is a step in the right direction. According to a Lithuanian diplomat, the subject has a political and economic aspect. From an economic point of view, now is the right time to think about the future of the euro area, but the political will is currently scarce. The moods in Lithuania are as in most northern states, and even a little more reserved. At this stage, there are not many arguments in support of the European Safe Asset. It may sound good on paper, but when it comes to putting it into practise, a number of drawbacks come up. This instrument is the most convenient for the ECB, believes the diplomat, according to whom the issuance of such bonds will make the lives of some countries difficult for purely technical reasons. 

Lithuania is sceptical about a common budget of the euro area based on its own experience - if we have gone through very painful measures, then others can do it too. Adherence to the rules should be enough. On the other hand, however, it may be easier to implement reforms if you have such an instrument available, which can play the role of a carrot. Access to the budget must be conditional on certain reforms being implemented, but this condition should apply only to relevant reforms, not to reforms per se. How will, however a euro area budget agreement be reached, as it is currently impossible to reach a consensus on revenues for the EU common budget that is significantly smaller and "safer", the Lithuanian diplomat asks. 

Regarding a euro area finance minister - this seems unnecessary from the Lithuanian point of view. Creating another bureaucrat would hardly help a lot. On the contrary, for the dynamics of Eurogroup meetings is radically different when they are chaired by one of your colleagues instead of an official. It is the same as in school – it is one thing for students to solve problems themselves, and quite different when they have a teacher among them, was the diplomat’s description of the situation, him being sceptical about calls for more transparency in the work of the Eurogroup as well. If its work becomes more formal, it could alter moods. It is better for this group to remain informal. Sufficient transparency has already been achieved with the publication of documents and public statements. The main message from this small euro area member country is agreed things first, discussing new ones later.

Bulgaria believes that the moment for deepening euro area integration is now appropriate in the direction of a comprehensive view of its governance and its smooth functioning. For Bulgaria, the only criteria for joining the euro area should remain the official ones - the Maastricht criteria. Convergence of standard of living is a natural process and is the result of free movement of people and capital in the euro area, where the marginal cost of labour and capital is homogenised between the centre and the periphery, and thus the standard of living increases where it was lower, says the Bulgarian position.

To Sofia, the new ideas proposed by the EC seem logical at first reading. The creation of a European Safe Asset would lower the debt financing cost of sovereigns in the euro area, but at the same time it would pose a moral hazard to countries with excessive debt levels. Such a form of co-financing could only function if eligibility criteria are imposed for sovereigns meeting the Stability and Growth Pact ceiling on public debt. A common euro area budget is a logical step towards improving the political mix between common monetary and national fiscal policies, but this budget should be limited to such policy areas that are specific to the euro area without duplicating Community policies, funded by the EU budget.

Bulgaria shares the view that a fairer governance of a deeper integrated monetary union also requires a fiscal governance institution that is an equal partner of the ECB. Regarding the Rainy Day Fund or the European Monetary Fund, Sofia believes that this role can be played by the current permanent rescue fund of the euro area - the European Stability Mechanism (ESM). For Bulgaria, where the topic of euro area membership has once again returned to the agenda and is one of the most discussed ones at the moment, the most important thing is that whatever is done in the euro area it should remain open to the participation of the non-euro area countries and that procedures are transparent and non-discriminatory. Furthermore, it is important that any new measures do not impose direct or indirect financial commitments in case of non-participation.

Benoît Cœuré, the French member of the ECB’s Executive Board, believes that in order to fully overcome the legacy of the euro area crisis, it is necessary to work towards aligning the levels of real income. It is therefore necessary to accelerate growth in the economies where the losses from the crisis were greatest in order for real convergence to "catch on". He said this at a conference in Brussels last week.

A curious reaction came from the head of the European Central Bank, Mario Draghi, who, following the June meeting of the Governing Council, reminded in response to a journalistic question that the European Commission already has a document on the future of the euro area and that is the five presidents’ Report. "So I guess it's to be welcomed - this new work on strengthening the monetary union - especially having in mind that we need to repair the fragilities that have appeared in the last few years in the union. Then we can discuss what we talk about, but this is a broader discussion, and it's not finished yet. It's just the beginning of a broader discussion", Mario Draghi said, looking surprised by the question. He is one of the co-authors of the five presidents' report.

Translated by Stanimir Stoev