By Simon Miller
The European Commission (EC) has set out a "roadmap" to restore global confidence in the region.
The commission is aiming to "break the vicious circle between doubts over the sustainability of sovereign debt, the stability of the banking system and the European Union's growth prospects" before the G20-imposed November deadline.
EC president Jose Manuel Barroso said, "This roadmap charts Europe's way out of the economic crisis. Reactive and piecemeal responses to different aspects of the crisis are no longer sufficient. We now need to get ahead of the curve."
He added: "Confidence can be restored through an immediate deployment of all the elements needed to solve the crisis. Only in this way we will be able to convince our citizens, our global partners and the markets that we have the solutions that measure up to the challenges all economies are facing. We need to reach agreement at the European Council on the 23 October".
The roadmap calls for:
1.Decisive action on Greece – so that all doubt is removed about Greece's economic sustainability. This must include disbursement of the sixth tranche, a second adjustment programme, based on adequate financing through public sector and private sector involvement and continued support from the Commission Task Force.
2.Completing Euro area intervention – including making the decisions agreed on 21 July 2011 operational, maximising the effectiveness of the European Financial Stability Facililty (EFSF), accelerating the launch of the European Stability Mechanism to mid 2012 and the provision of sufficient liquidity by the European Central Bank.
3.A fully coordinated approach to strengthen Europe's banks - this should be based on a reassessment by the supervising authorities using a temporary significantly higher capital ratio of highest quality capital after accounting for exposure. Banks should first use private sources of capital, with national governments providing support if necessary. If this support is not available, recapitalisation should be funded via a loan from the EFSF. Pending this recapitalisation, these banks would be prevented by national supervisors from distributing dividends or bonuses.
4.Speeding up stability and growth-enhancing policies – including rapid implementation of existing commitments on services, energy and free trade agreements; swift adoption of pending proposals to enhance growth such as tax initiatives, fast-tracking forthcoming proposals, especially those that extend the benefits of the Single Market and targeted investment at the European Union level, including through project bonds.
5.Building robust and integrated economic governance for the future, based on the existing treaties (Article 136), reinforcing the Community approach. Building on the reinforced "six pack" on economic governance and the European semester already adopted, the proposals seek to integrate the European Stability Mechanism and the Stability & Growth Pact into the same fully integrated governance system to increase coherence and efficiency. This would provide new powers for the Commission/Council to intervene in the preparation of national budgets and monitor their execution. Enhanced cooperation should be envisaged in all cases where otherwise decisive action would be held back.
The full roadmap can be found here