6  Jan in’t Veld, Fiscal consolidations and spillovers in the Euro area periphery and core, European Commission Economic Paper 506, October 2013. 7  Dawn Holland and Jonathan Portes, Self Defeating Austerity, National Institute Economic Review No. 222 October 2012. 4  BIS central bankers’ speeches  I could elaborate on the financial dimension of EMU. The Banking Union, when completed, has the potential to move up to the highest level of institutional integration. Similarly, the Juncker Plan is a useful integrated instrument, although too weak and slow at present. I have stressed elsewhere the need for and the benefits of moving ahead with a much stronger “Financing and Investment Union”, incorporating these steps forward and going well beyond the proposed Capital Markets Union. Yet, today I prefer to focus on the fiscal and structural policy dimensions of EMU. In practice, our fiscal framework has been implemented as a fairly weak monitoring framework. Likewise, on the structural front, the MIP (Macroeconomic Imbalance Procedure) is clearly lacking teeth. An institution is clearly missing to develop a mandatory and, hence, full coordination of national policies in the fiscal and structural areas, an idea I will elaborate upon in a few moments. The highly political nature of the debate should not hide the strong economic rationale for such a reform. 15 years ago Peter Kenen 8 argued that a fiscal integration could make currency areas thrive, even though they did not meet all the features of an optimal currency area.
So let me describe first the mandate and the shared strategy, then the tasks of a euro area Finance minister, and last the way to anchor its legitimacy and capacity. A. Which mandate and what strategy? The Commission has already introduced a two-stage European semester, so that the discussion of the outlook for the euro area precedes country-by-country analysis. We must take this further: the mandate of this decision-making institution must be to achieve the strongest, sustainable and balanced growth. To fulfil the mandate, this institution – in particular the euro area Finance Minister at the head would be tasked to outline the collective strategy. It would be essential for the Euro Area, informed by independent advisory bodies, to collectively agree on overall economic policy objectives, and on the division of tasks through the setting of individual performance targets for Member States. Such an agreement could be reached by a process following more or less the European Semester calendar: •  A preparation phase would provide the macro framework and take on board individual country contributions, as well as the expertise from the Fiscal and Competitiveness Councils. This phase would require assessing: first, potential growth, with a quantified ambition to raise it; second, the euro area output gap, and employment, taking into account limited cross-border labour mobility; third, the sustainable fiscal and external positions for the euro area as a whole, as well as the sustainable distribution of these positions across countries.