S. Micossi: THREE THINGS TO DO TO STRENGTHEN EUROZONE ECONOMIC GOVERNANCE
Mu main points on economic governance reforms to strengthen stability and revive growth in Europe centre on risk, discipline, and symmetry, all of which need priority attention and speed to enact.
Our current risk-sharing system has evolved in the right direction in response to the economic crisis, but it still lacks some essential components. In the finalized Banking Union, risk-sharing arrangements need to be complemented by supra-national deposit insurance backed by a common budget in case of a future systemic banking crisis. This common budget could evolve gradually from the European Stability Mechanism (ESM), the area’s common stabilisation fund. In addition, the system needs to have common insurance against idiosyncratic shocks hitting the sovereign debt market of highly indebted countries, requiring a lender of last resort by the European Central Bank (ECB) plus a common fiscal back up, which could also be built upon the ESM. The Resolution Fund should be fully mutualised at a more rapid pace and be expanded in size.