European Commission president Jose Manuel Barroso pleaded yesterday for radical economic integration in Europe to resolve the debt crisis, saying the EU faced its greatest challenge ever, as he hit back against French and German policy domination.
In a combative speech to the European Parliament, Barroso called for the creation of a tax on financial transactions across the 27-nation European Union and joint bonds to resolve the nearly two-year-old crisis.
“We are today faced with the greatest challenge our Union has known in all its history,” Barroso said, warning that the bloc was gripped by a “financial, economic and social crisis.”
Defending the role of the Commission, the EU’s executive arm, Barroso delivered a thinly-veiled rebuke against Berlin and Paris over their call for a eurozone economic government spearheaded by the states.
“The Commission is the economic government of the Union. For this, we certainly don’t need more institutions,” Barroso said in his annual “state of the union” speech.
Barroso warned that an inter-governmental approach risked leading into a “renationalisation and fragmentation” of policies, and “the death of the united Europe that we want.”
His remarks were greeted with loud applause in the 736-member chamber, where legislators have voiced concern that French President Nicolas Sarkozy and German Chancellor Angela Merkel are trying to dictate policy at the expense of EU institutions.
Sarkozy and Merkel proposed in August that EU president Herman Van Rompuy, who already chairs the council of 27 EU states, become the head of a new body overseeing governance in the 17-nation eurozone.
MEPs see the proposal as a bid to marginalise the European Commission, a body tasked with representing the general interest of the EU.
“If Germany and France are promoting Van Rompuy at the expense of Barroso, it is because the Commission president is not the puppet of the states and he is standing up to the capitals,” said a member of Barroso’s entourage.
Europe needs “more than ever the independent authority of the Commission,” Barroso said, adding that Brussels was “the guarantor of fairness.”
Defying divisions within the EU, Barroso pushed two controversial measures, a joint eurozone bond deeply opposed by Germany and an EU-wide financial transaction tax rejected by Britain.
“Once the euro area is fully equipped with the instruments necessary to ensure both (economic policy) integration and discipline, the issuance of joint debt will be seen as a natural and advantageous step for all,” he said.
But with taxpayers in some European Union states increasingly loathe to pay out for chronic debt offenders such as Greece, Barroso said such bonds would be not be a free ride for anyone.
The ‘stability bonds’ will be “designed in a way that rewards those who play by the rules and deters those who don’t,” he said, adding that the Commission would issue proposals in the coming weeks.
Belgium and Luxembourg, as well as states in financial trouble, such as Greece, favour eurobonds as the most effective and durable way to resolve the debt crisis.
But Germany, which enjoys the eurozone’s lowest funding rates, says they would take the pressure off profligate governments to get their finances in order by providing cheaper cash than they could raise on their own.
A proposal for a financial transaction tax was adopted by the European Commission yesterday despite US opposition and objections in London, home to major financial markets.
“It is time for the financial sector to make a contribution back to society,” Barroso said.