Completing EMU, deepening the EU

The fact that EMU’s governance framework had remained incomplete allowed for the building up of competitiveness and fiscal disequilibria in some member states during its first ten years and left the Eurozone unprepared to cope with the sovereign debt crisis. While some of those weaknesses have in the meantime been addressed in response to the crisis, EMU’s governance framework is still incomplete. As a consequence EMU will not be sustainable without further European integration at the Eurozone level. The chapter discusses recent proposals to complete a banking union and to further enhance other Eurozone institutions, reinforcing their effectiveness and accountability and, not the least, the EU’s identity. Those changes need the cooperation of all member states. They should all be prepared to embark on completing the economic union side of EMU (accepting that risk reduction and risk sharing go hand in hand) but also to undertake the necessary reforms at the domestic level (in order to avoid new crises and ending up in a bad equilibrium as permanent laggards). Brexit will facilitate a necessary deepening of European integration by the core Eurozone member states: firstly, the UK will no longer be permanently blocking from within; secondly, other member states, which have committed to join EMU but seem now unwilling to do so (and seem also to be diverging in terms of other major institutions of permanent structured cooperation), could also choose to invoke article 50 TEU and leave the EU and remain on a lower level of integration like the European Economic Area (as is the case of Norway).