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MEPs call for a new EU stability agency

Friday 26 November 2010 - by Nicola York

MEPs are calling for the creation of a European stability agency to safeguard the eurozone from the huge public debt facing many member states.

In an open letter to EU leaders yesterday, members of the Socialists & Democrats said a more ambitious economic and monetary union reform agenda is needed otherwise the EMU will not survive in the long term.

Although S&D believes the latest political agreement on a permanent crisis mechanism is a "necessary but insufficient step" in the right direction, it says this would be more effective if a common system of debt management was established as well.

The MEPs are proposing that the stability agency should bring together a future permanent crisis resolution mechanism and a debt management system under one umbrella.

They said: "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 S&D MEPs also call for 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 S&D members say that "in order to survive in the long run, the European monetary union must at last become a fully-fledged construction".



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