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Geostrategy Updated: 18 Dec 2018

“There has been a window of opportunity, which has clearly been missed by Europe”

Speaking at the Rome Investment Forum, José Manuel González-Páramo weighted on the future of three key projects for the European Union: the banking union, the capital markets union and the fiscal union. This discussion took place at a key moment for the European bloc, after the meetings held in the last Eurogroup, in the Ecofin and the European Council.  “During this year 2018 there has been a window of opportunity, which has clearly been missed by Europe to implement the necessary reforms,” he noted.

Parlamento Europeo

Now, he continued, the European Union faces a year with very little regulatory activity, through the elections to the European Parliament in May 2019, during which there could be a lot of “political noise.” José Manuel González-Páramo said that, while the decline in economic growth is still not dramatic, “there is a need to recover some sense of urgency and to avoid complacency" to prevent future crises.

Pending reforms

After the recent European summit, strongly marked by brexit, José Manuel González-Páramo voiced his pessimism about the future advances in economic and fiscal matters, taking into account the current scenario.

BBVA’s executive director went over the key pending issues of the three economic projects underway in the EU. Regarding the banking union, he considers that real steps need to be taken to conclude the two pending components:  a credible common fiscal backstop for the Single Resolution Fund, and a European Deposit Insurance Scheme (EDIS).

José Manuel González Páramo was appointed Executive Member of the Board, Head of Global Economics, Regulation and Public Affairs at BBVA in 2013. - BBVA

Regarding the Capital Markets Union, José Manuel González-Páramo dubbed it a key priority for the European Union. In his opinion full commitment and action by all parties to complete the Capital Markets Union is now becoming urgent, as a complement to a complete Banking Union, allowing banks to act as catalysts for the project.

Also, José Manuel González-Páramo recalled that a monetary union requires progress towards a fiscal union, and that leaving monetary policy with the burden of the adjustment at times of severe crises is suboptimal.  In the event of a crisis, he explained, “having some kind of fiscal stabilization mechanisms is desirable and may help to avoid contagion effects to the rest of the area such as those we have observed during the past decade.”

One of the proposals that the Committee unveiled in 2017 was the creation of a Finance Minister of the Eurozone and development of European Stability Mechanism´s institutional competences According to González-Páramo, this is positive because these bodies represent the fiscal and economic policy of the eurozone as a whole. However, as of today, the creation of a Minister of Finance of the Eurozone remains a remote possibility.

In this sense, BBVA’s executive director stressed the limited ability of European legislators to reach an agreement on important policy guidance and decisions that will make the Euro zone  more robust and strong.

The Rome Investment Forum is a financial event held in Rome and organized by the Italian Banking Federation, that invites businesses, regulators and civil society to share their insights into the future of Europe. José Manuel González-Páramo participated in a roundtable discussion on how economic and financial reforms can help improve the lives of Europeans. He was joined onstage by Mark Garvin, Vice Chairman of Corporate and Investment Banking, J.P. Morgan; Andrea Montanino, Chief Economist, Confindustria; and Bernard Spitz, President of the French Insurance Federation (FFA) y and President International & Europe of the Movement of the Enterprises of France (Medef).