Call For a New European Stability Agency To Counter Speculators

Key members of the S&D group today called on EU leaders to set up a European Stability Agency to counter public debt speculation now confronting most Euro zone members.

Spelling out detailed proposals for reform, the Euro MPs warn: “Half-hearted reforms will not save economic and monetary union.”

They underline that “the latest political agreement on a permanent crisis mechanism to safeguard the financial stability of the euro area is to be welcomed as a necessary but insufficient step in the right direction”.

The call for a new European Stability Agency came from group vice-president Stephen Hughes, economic and monetary affairs coordinator Udo Bullmann and the author of a report on innovative financing, Anni Podimata, in an open letter to European Council president Herman van Rompuy and Commission president Jose Manuel Barroso. The full text of the letter is on the S&D website at www.socialistsanddemocrats.eu

The Euro MPs stressed that “mutual pooling of parts of sovereign debt could safeguard the lowest possible interest rates for euro area members as a whole, as well as a unified and highly liquid European bond market, and could thereby contribute significantly to financial stability and the necessary consolidation of public finances.

In a first phase participation in the new agency could be on a voluntary basis under enhanced cooperation but should involve rights as well as duties for those who join. Any member failing to respect its fiscal commitments to reduce public debt and deficit could be expelled and face the risk, as a result, of higher interest rates on financial markets.

The Euro MPs write that this would create “stronger incentives for sound economic policy than the current economic governance proposals may achieve via a pro-cyclical system of sanctions”.

They add: “The future agency should bring under one umbrella a future permanent crisis resolution mechanism and a common system of debt management”.

The Euro MPs underline that comprehensive reform should also include a financial transaction tax and specific European project bonds, managed by the European Investment Bank, to make the EU 2020 strategy a reality.

In their letter, the three S&D members stress that “in order to survive in the long run, the European monetary union must at last become a fully-fledged construction”.

They urge both presidents to “provide a clear political leadership” for ambitious reform of the Euro zone, ahead of a decisive mid-December European summit.