The word of the IMF: a more unified euro area

J.L.M. Campuzano (Spanish Banking Association) | “A more unified euro area can be a compass to prosperity for the region and a beacon of hope to the world. It can be a source of global economic stability and proof that international cooperation can still deliver.” – IMF Managing Director Christine Lagarde

The IMF is forecasting global growth of over 3.9% in 2018. For the Eurozone, the forecast is for growth of 2.2%. The fifth year of economic expansion, confirming sustained and diversified growth.

But we need to look to the future. And this future, in the Eurozone’s case, is linked to greater integration. For Lagarde, as our authorities design this future they need to focus on three points: a single capital market, improved banking union and greater fiscal integration. Find a balance between risk reduction and risk-sharing.

Thinking about a single capital market with the final aim of diversifiying financing sources for companies falls short of expectations. The IMF also refers to improving bankruptcy regulations, harmonising the insolvency laws and, in general, linking the regulation related to the protection of the consumer and financial stability to the activity and not so much to who is carrying it out.

A single capital market is complementary with banking union. And for the latter to come to fruition, there needs to be a single deposits insurance and the sharing of bigger risks within the Single Resolution Fund. So a sharing of trust within the Eurozone, but also ensuring this trust is supported. Here the single supervision is working as part of a continual adjustment of the European banks to make them more solid and secure. And all of that, against a backdrop of pending monetary normalisation and obligatory digitalisation, also to improve their profitability.

In a recent survey, popular support for the euro has reached the highest percentage since its creation, over 74%. Particularly significant was that 71% considers the region to be a stable one within a very complicated world. This shows that European integration has come a long way. But we should not be complacent.