Euro area needs better coordinated political union: ECB’s Bini Smaghi

Lorenzo Bini Smaghi, a member of the European Central Bank's executive board, on Friday said the euro area's institutional framework was not compatible with its political union and urged members to take a more active stance in its dialogue.

At the Hellenic Foundation for European and Foreign Policy in Poros, Greece, Bini Smaghi said: "The fact is the people of the different member states have not fully understood that we already have a political union. Furthermore, the institutional framework does not provide a decision-making process that is fully compatible with such a political union."

Bini Smaghi said a monetary union entails a much greater degree of political union than many commentators, politicians, academics and even the public ever thought. He said decisions taken in some parts of the union affect other parts in a very direct and sometimes dramatic way and that some specific national problems can only be dealt with through decisions taken jointly.

In the context of the euro area, Bini Smaghi said this demanded more active participation by the different governments in the supervision of each others' policies, than is currently the case. "It is not sufficient for each member of the union to keep its own house in order so that its underlying economic, financial and budgetary conditions are consistent with a sustainable membership of the euro area. The others have to do the same," he said.

Click here to read the speech.