We have developed a number of proposals for a stability-bound arrangement with the Euro as the common currency. Included is the realization that prosperity in Europe is only guaranteed through sustained monetary and fiscal stability as well as stability of the financial system. This stability is accordingly more difficult to achieve as more state, but also private, actors rely on assistance coming from outside. That means first of all that the principle of complete liability of each actor for its own economic decisions must become valid again in order to strengthen the responsibility for and awareness of risks in economic decisions.. Moreover, every fundamental reform that alters the European monetary union must take into account and build upon the changes that have been made in the course of battling the crisis up until this point. The hitherto existing reforms take in part the right direction, but they do not arrive at the end goal, which is to purge member states‘ excessive debt and actively discourage future undue borrowing.
Next, it is necessary also to operatively and unambiguously anchor the reforms decided upon until this point into European primary law. That includes the improvement of the legal foundations for the Sixpack and the transfer of the Treaty on Stability, Coordination and Governance to European primary law. In this respect, our proposal adopts a long-term nature. It should facilitate a reanimation of the EMU without introducing joint and several liability for public debt or any form of monetary financing at the European level. We oppose Eurobonds and well as the attempt to make the European Central Bank into a lender of last resort for the fiscal problems of member states. Principally, we suggest the following:
- The disciplinary functions of the market must be reinforced. That includes realistically reconfiguring the risk weighting of 0 percent for state securities. Private investors must take into consideration for their future plans that they will share in the restructuring of public debt.
- The reduction of public debt to a sustainable level must take precedence to reconstruct member states‘ ability to act autonomously.
- New structural deficits must be effectively prevented.
- Should a member state enter budgetary crisis, it must adopt a binding program for reforms in a timely manner that will be overseen by the Commission and the Council. If the member state is not willing or able to reform, then it must exit the EMU. In this sense, a member state’s exit from the EMU must be legally regulated. This threat of sanctions should strengthen incentives to practice budgetary discipline.
- The European Stability Mechanism should have the role of stabilizing financial markets under extreme circumstances.
- Structural reforms, not quantitative easing or further public indebtedness, must drive economic growth.
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