Core proposals to create a genuine single market for investment have been around for a decade and are seeing a new push through the Commission’s Savings and Investments Union rebranding. But the obstacles remain the same: overcoming the vested interests of market players and national public authorities.
When it comes to building a monetary union, the EU still lacks a common guarantee for bank deposits, due largely to Germany’s resistance to risk-sharing. Italy, meanwhile, continues to block a liquidity backstop for failing banks.
2. Let investors buy more EU debt
If you want investors to use the euro, one simple way is to borrow it from them through EU-backed bonds. With the EU’s €750 billion post-Covid recovery fund expiring at the end of this year, the Commission wants to issue more of this type of joint debt in its next seven-year budget in order to fund Ukraine or tackle unforeseen emergencies. But it will have to overcome resistance from fiscally conservative countries including Germany and the Netherlands, which don’t like the idea.
In the meantime, the Commission wants an existing tool — the European Stability Mechanism — to be brought under EU law and to be available to spend. The ESM is a €500 billion intergovernmental fund created in 2010 as a safety net for financial crises, and lies mostly unused. But traditionally frugal countries in Northern Europe killed a similar pitch years ago — and Germany remains an obstacle. “Is this a good idea? I would say yes, but I don’t think it’s on the table,” Bruegel Senior Fellow Rebecca Christie told POLITICO.
3. Enter the crypto ring
The U.S administration is betting on cryptocurrencies pegged to the dollar to protect the currency’s global dominance at a time when its own economic policies are weakening it. The Commission wants to do likewise: “For the EU, it is essential to foster the uptake of euro-denominated stablecoins,” it wrote, calling for an assessment of all the options “to enhance eurodenominated digital assets.” At the moment the share of stablecoins pegged to the dollar is over 90 percent.
The European Central Bank and the Commission have repeatedly clashed on how to deal with dollar stablecoins, with the ECB more focused on risks than opportunities. Only recently have EU policymakers fully embraced a made-in-EU response. “We can have both stablecoins (in euro) and tokenized deposits, new bank deposits. But if we have none of them, I would be worried about sovereignty,” French central bank Governor François Villeroy De Galhau said in Davos.
