Lagarde opens to fiscal union. Which is useful for future new Eurobonds

Brussels – Private capital, more integrated banks, even Eurobonds. The possible options for making Europe strong economically and competitive on a global scale are multiple and diverse, and the European Central Bank has already suggested some of them. The latest, in order of suggestion, is “budget union.”  Christine Lagarde, president of the ECB,  puts it on the table responding to Pasquale Tridico (M5S/Left), who, at a hearing in the Economic Affairs Committee of the European Parliament, asked her position on common debt securities (the Eurobonds).

“Eurobonds are certainly one possibility, but a budget capacity might be another,” Lagarde said. “We have a monetary union, but we don’t have a budget one,” so “having a budget union would be an improvement” for the EU and its euro area.

New calls come for politics. There has never been a shortage of calls for reform from the ECB, especially to get public accounts in order, just as there has been no shortage of calls to implement as soon as possible and fully comply with the new Stability Pact. Lagarde has now included another possible agenda item for
states to consider. The ECB president is basically calling for creating a federal EU budget, which would make it easier to get to Eurobonds in the future.

In any case, “it’s up to politics to decide,” and that decision “must be quick” because “time is of the essence”, and there doesn’t seem to be that much of it anymore. Lagarde reminds MEPs that “we are witnessing a rapidly changing geopolitical landscape” while “undergoing major structural challenges to our economic model.” References to the trade tensions with China, the continuing Russian-Ukrainian war, and the risks associated with Donald Trump’s return to the presidency of the United States. 

The EU and its eurozone must do what the situation demands, a situation that is always uncertain and unpredictable. The ECB will do what it can within its mandate, is the assurance offered by Lagarde, who does not take a position on possible interest rate cuts, displeasing those who would have welcomed anticipations of next week’s meeting (Dec. 12). One of these is Marco Falcone, vice-head of Forza Italia’s delegation in the EPP group, who is convinced that “there are conditions to cut rates again,” and that therefore “we expect decisions along these lines in the next Governing Council.” The president of the European Central Bank cuts it short: “We will assess on the basis of data, without a predefined path.”