FRANKFURT, Germany (AP) — The top central bankers from France and Germany are joining in an appeal to fix longstanding flaws in the euro currency by more closely integrating their economies and putting more authority over financial policies at the European level.
Francois Villeroy de Galhau and Jens Weidmann argue in an article Monday in the Sueddeutsche Zeitung daily that the 19 member countries must get moving on measures to make the shared currency work better and keep trouble in one country from infecting others.
Those measures include increasing cross-border shareholding in companies, which would spread the burden of downturns as losses from a troubled company would be shared by investors in different countries. Such shareholding is a major factor in smoothing recessions in the United States, but is less common in Europe.
They also advocate completing a system of Europe-wide banking regulation and oversight. The EU has implemented some aspects of the so-called banking union, aimed at preventing bank bailouts from overwhelming national budgets, but the scheme still lacks full-fledged deposit insurance at the EU level.
Such measures, combined with a new EU-wide investment program, could encourage investors to shift money out of savings and toward productive use in the economy, Weidmann and Villeroy de Galhau wrote.
Ultimately, they said, the EU should decide whether to create a European finance ministry and fiscal council that would be subject to parliamentary control.
The finance minister idea has been proposed before but gained little political traction. The European Commission, however, is already working on a plan to expand companies' opportunities to link up with investors through share markets.
The shared currency, set up in 1999, was shaken by a crisis starting in 2009 over excessive government and bank debt in member countries such as Greece, Ireland, Portugal, Cyprus and Spain, all of which needed bailout loans from the other member states. The crisis eased as economic growth began to recover and as massive monetary stimulus from the European Central Bank helped calm financial markets. Yet economic growth across the currency union remains modest and debt levels in countries such as Greece and Italy are still high.