Mr. José Leandro:

I thank the honourable Chairman and members for the opportunity to address the joint committee on the topic of the so-called five presidents' report on the completion of the economic and monetary union. As you know, the report was chaired by President Juncker in co-operation with the president of the euro summit, the president of the Eurogroup, the President of the European Central Bank and the President of the European Parliament. It was published in June. It is the result of an inclusive process which followed from a series of discussions between the presidents and the member states.

The report presents a vision and a roadmap for the completion of economic and monetary union by 2025, at the latest. It is ambitious and yet pragmatic. It is built on the experiences of the recent crisis, which exposed important gaps in the structure of the economic and monetary union. The completion of the EMU is not an end in itself but a means to create a better life for its citizens and to prepare the EU for future global challenges, enabling each of its members to prosper.

One of the legacies of the crisis is the significant divergence across the euro area. In some countries unemployment is at record highs while in others it is historically low; in some fiscal policy can be used counter-cyclically while in others fiscal space will take several years of consolidation to recover. Today's divergence creates fragility for the whole union and a new convergence process must be launched.

Progress is needed on four fronts toward four unions, economic, financial, fiscal and political union. All unions depend on each other and progress will have to be made in parallel. The reports suggest moving forward in two stages. In the first stage until mid-2017, the measures concentrate on what can be done right now, building on and making the best use of existing instruments. In the second stage the report proposes a set of more fundamental steps to complete the economic and monetary union. Some may require changes to EU treaties in the second stage. There is, therefore, a gradual move from a rules based system to a system with further sovereignty sharing within common institutions. As President Juncker stated in his State of the Union address, the Commission will move forward without delay with the first stage initiatives.

Let me say a few words on the proposals put forward by the report. First, economic union should aim to deliver more real convergence, jobs and growth. In the first stage, this would be achieved through a renewed impetus to the implementation of reforms and strengthening the current governance framework, to be followed in the second stage, by commonly agreed standards with possibly a legal character. In the first stage economic union rests on four pillars, a euro area system of competitiveness authorities, a strengthened implementation of the macroeconomic imbalances procedure, a greater focus on employment and social performance and a stronger European semester.

The Commission has already made some changes to the European semester this year, to sharpen its focus, better involve national stakeholders, improve reporting and strengthen the social dimension. We intend to continue this work, to further streamline it and to integrate the euro area and national dimensions better.

The competitiveness authorities should build on existing structures with an emphasis on reform implementation, increased national ownership and a push towards increasing convergence. The implementation of structural reforms should facilitate the ability of member states' economies to adjust to future economic shocks, while supporting convergence towards the best performance and practices in Europe. In Ireland, a rapid adjustment was key to restoring competitiveness in the aftermath of the crisis but as in many member states, fragilities remain, particularly in the non-traded sector.

Second, the aim of the financial union is to create a truly single financial and banking system where monetary impulses are transmitted uniformly across countries and where financial markets contribute to the stability of the EMU by diversifying risk across countries. The setting up of the single supervisory mechanism and the single resolution mechanism has already contributed to weaken the links between banks and sovereigns but initiatives have to be completed. First, we need to focus on implementing what has already been agreed, including the transposition of the Bank Resolution and Recovery Directive and reaching an agreement on bridge financing and a back stop to the Single Resolution Fund. A common deposit insurance scheme is also indispensable for a complete banking union and to ensure that the safety of bank deposits is the same in all member states. The Commission intends to come forward with proposals on first steps towards such a scheme before the end of the year. This could take the form of a re-insurance system at European level for the national deposit guarantee schemes.

It will also be important to ensure that all banks participating in the banking union enjoy a level playing field by reducing the still-significant discretion at national level that has important implications, notably for the quality and composition of banks' capital. Finally, a capital market union will contribute to the integration of equity markets, reduce the volatility of cross-border investment and enhance risk-sharing. In Ireland, where small and medium-sized enterprise, SME, financing costs remain above the euro area average and Irish SMEs still look primarily to banks for their financing needs, the capital market union will have a particularly important role to play.

As for the fiscal union, in the first stage the report proposes that a new advisory European fiscal board would be created with three functions. First, it would co-ordinate the work of the national fiscal councils. Second, it would offer an economic, not legal, view on the appropriate fiscal stance and third, it would carry out ex postevaluations of how the fiscal governance framework was implemented. In the second stage, a new macroeconomic stabilisation function would improve the cushioning of large macroeconomic shocks. In addition, a euro area treasury would be set up in the second stage and could be a place for collective decision-making on some aspects of fiscal policy. Ireland has made remarkable progress in placing its public finances on a sustainable path and this is welcome. However, public debt levels remain high, as they do in many member states, underlining the need for continued prudence and for a strong and transparent fiscal governance framework.

Finally, the initiatives put forward in the report involve further sharing of national competences and hence require further steps towards strengthening democratic legitimacy. It is necessary to increase co-operation between the European and national parliaments and involve them more closely in the European semester. I know this committee has been engaged in discussing the semester and has shown a keen interest in continuing and deepening that dialogue, which we welcome. I am interested to listen to the ideas put forward by members on this point. The strengthening of democratic oversight will also be achieved by the integration of some intergovernmental arrangements into EU law, including the European Stability Mechanism. A strengthened Eurogroup also will provide a stronger co-ordination centre, possibly with a permanent president in the longer term. A more consolidated external representation of the euro area should strengthen its voice in international financial institutions, particularly at the IMF, and make it commensurate with the euro area's economic weight.

Completing the economic and monetary union is a dynamic and evolving project and the Commission remains open to answer questions and to listen to members' views. I thank the committee.