The structures governing Economic and Monetary Union (EMU) must be reformed if they are to remain "appropriate" to Europe's long-term economic needs, the former president of Germany's Bundesbank, Prof Hans Tietmeyer, has warned.
Presenting a lecture to the Royal Irish Academy last night, Prof Tietmeyer said euro-zone countries needed to draw closer together to deliver the solidarity needed to support the euro. He said there was a difference between a mere free trade area and a "real union", arguing states that did not support this should not be allowed to hold others back.
Prof Tietmeyer believes the euro has the potential to become a genuine rival to the dollar in the long run but acknowledged that this depended on the performance of the euro-zone economy.
He said the euro did not, contrary to some expectations, solve the structural problems of core EU states such as Germany and Italy. "These difficulties cannot be solved through monetary policy," he said. "It is to be hoped that the big countries are aware of their responsibilities."
Prof Tietmeyer said EMU was already a political union of sorts, but recognised that this was not the prevailing view. He went on to call for "consistency of national policies" within the EU but stopped short of recommending tax harmonisation across the union. He was positive on adopting a common definition of the tax base across the EU however, arguing that national tax systems that favoured certain individuals or companies over others would "undermine the rules of competition".
Prof Tietmeyer is enthusiastic about maintaining the existing Stability and Growth Pact, which he says is "very necessary for preserving fiscal discipline" and hit out at what he sees as the EU's failure in implementing the Lisbon economic agenda.
