Photo: Daniel Ochoa de Olza/AP
Last week, a few days before Spain’s bailout was announced, Spain’s Prime Minister Mariano Rajoy sent an urgent letter to the head of the European Commission saying that the Eurozone was headed for a train wreck and urging immediate reform, El Mundo reports.The letter calls for radical changes in the structure of the EU, all aimed at tighter fiscal integration.
(This is one of the only two permanent solutions in Europe. The other is breaking up the currency union.)
The reforms Rajoy proposes, which include a Euro area tax authority, are radical and would presumably take years to implement.
The tone of the letter is pressing with phrases like: “The situation is worsening rapidly, and we must address it as soon as possible” or “the euro is at risk, we need to act decisively to national and EU level to address a situation where the outcome is unpredictable.”…
Rajoy insists that there is a clear “risk of rupture of the euro” and this causes great difficulty in refinancing the debt and prevents the adjustments made by the countries have a positive effect. “The situation is untenable, unpredictable and could bring the euro to the limit,” said the president.
In his opinion, we must act immediately in five areas: the first condition is fiscal consolidation, the second in-depth market reform by providing them with flexibility, and third, to integrate national markets by facilitating the mobility of workers and the liberalization of services – at this point, Rajoy encourages the Commission to mobilize all possible means to facilitate growth and job creation.
The fourth point would be to ensure financial stability in the euro area by reducing risk premiums, and insists that this is a work that today is solely for the European Central Bank, an institution that in his opinion, must act to ensure liquidity homes and businesses.
Finally, calls for “strengthening the institutional architecture common” with “greater transfer of sovereignty in the fiscal and banking.”
In this sense, Rajoy is proposing a tax authority in Europe to allow a “centralized control of finance” and “manage European debt.” Also ask for a supervisor and a Community deposit-guarantee fund common.