Reforming the governance of the Economic and Monetary Union: the issues

European Central Bank headquarters, Frankfurt (Germany). Photo: Maryna Yazbeck (@yazbeckistan)
Working Paper

Original version in Spanish: Elementos de discusión para una reforma de la gobernanza de la Unión Económica y Monetaria.


The adoption of the Next Generation EU (NGEU) may represent a substantial change in the process of European integration, especially in the reform of the Economic and Monetary Union (EMU), including financial, fiscal and political unions. The NGEU forms part of the EU response to COVID-19, a non-economic and global shock with asymmetric economic effects. Whereas some member states, such as Germany, may return to pre-COVID levels of output in 2021, others might not do so until the end of 2022. In some countries, levels of public debt have reached record highs, deficits are running significantly above 3% of GDP and public accounts are highly unbalanced in structural terms. In such circumstances, strict compliance with the requirements imposed by the Stability and Growth Pact (SGP) would lead to a severe and prolonged economic contraction in the EU. It is hardly surprising therefore that the debate in the EU focuses particularly on reform of the fiscal rules. However, the various elements of EMU governance are intimately interlinked and any proposal for a partial reform should come within the framework of a comprehensive reform of EMU. This paper sets out a series of questions for the EMU reform debate, including the Banking Union, the Capital Markets Union, the European Semester and political union (PU). The aim is to stimulate the debate among Spanish experts to prepare agreed proposals for reforming the economic governance of the EU, especially the SGP.

Discussion points for reforming the governance of the Economic and Monetary Union

The economic –fiscal, monetary and regulatory– measures adopted in the EU to offset the effects of COVID-19 could represent a turning point, if not a paradigm shift, in the process of European integration.

This Working Paper seeks to pose a series of questions aimed at guiding the reflection of a group of Spanish experts to draw up agreed proposals for the design of the post-COVID-19 economic governance of the Economic and Monetary Union (EMU). The elements discussed in this paper to identify a wide-ranging series of issues for debate are framed, on the one hand, within the nature of the crisis and how it interacts with structural aspects of member States’ economies and, on the other hand, within the EU’s economic, political and institutional response, particularly, but not exclusively, in the Next Generation EU (NGEU). The type of proposals that may be drawn up depends fundamentally on the extent to which such a political response represents a profound change in the consensus regarding the future of the EU (the so-called ‘Hamiltonian moment’), which could lead to a qualitative leap in the process of European integration –a significant transformation in the institutional architecture of the Union–, or whether it just represents a one-off change in the political moment of the EU. In the latter case, the EU’s response would at least help remove some of the existing stumbling blocks to the proper working of the current EMU architecture through incremental and gradual changes towards a deeper and better-functioning economic integration.

Carlos Martínez Mongay

With the collaboration of:

Enrique Feás
Senior Analyst, Elcano Royal Institute 
| @EnriqueFeas

Miguel Otero Iglesias
Senior Analyst, Elcano Royal Institute | 

Federico Steinberg
Senior Analyst, Elcano Royal Institute | 

European Central Bank headquarters, Frankfurt (Germany). Photo: Maryna Yazbeck (@yazbeckistan)