Europe 'at a crossroads' in wake of economic crisis

ALDE group leader Guy Verhofstadt says a monetary union "without some form of fiscal federalism and coordinated economic policy will not work".

Speaking at a news conference on Monday, the former Belgian PM said, "The current crisis is a matter of the utmost urgency but at the same time an opportunity.

"Now European citizens expect their leaders to move from a day-to-day crisis management to taking charge and prepare the EU for the challenges of the 21st century.

"Supporting European integration is not a matter of solidarity but of enlightened self-interest. It is time to address the big questions."

Sat alongside former German chancellor Gerhard Schroder, Verhofstadt said, "Europe is at a crossroads. It is a moment of choice for both the 17 countries of the eurozone and the 27 countries of the EU.

"The eurozone needs to decide whether it will move in the direction of a more comprehensive fiscal and economic union or risk a breakup that would put in danger the whole European integration."

He said the EU had to decide "whether to promote growth, speak with a common voice on global issues and play a significant global role in the 21st century or accept that the world will move on without us".

Verhofstadt added, "Not making a decision and taking action on these fundamental questions will weaken Europe as a whole and its member states individually, including the larger ones."

Both former political leaders were in Brussels to launch a pamphlet issued by the Nicolas Berggruen Institute, a US-based think tank, which sets out a nine-strong action plan for the future of Europe. Other members of the Institute include former UK PM Tony Blair and commission president Jacques Delors. Both have endorsed the document although they were absent from the launch.

The Institute says that contrary to what some currently believe, the EU has been a success, saying, "It is important to emphasise that, despite the recent difficulties."

In the short-term, it argues, further market contagion 'needs to be avoided'.

The document adds, "Therefore, rapid implementation of the 21 July decision to allow the stabilisation facilities to intervene with precautionary measures, is of critical importance.

"In addition, the size of the existing facilities needs to be expanded. By 2012, these facilities should be transformed into a full-fledged European fund.

"It has become clear that a monetary union without some form of fiscal federalism and coordinated economic policy will not work. Nation states will need to share certain dimensions of sovereignty to a central European entity that would have the capacity to source revenue at the federal level in order to provide European-wide public goods.

"Furthermore, a common European debt facility, Eurobonds, should be developed. Eurobonds need effective control mechanisms to avoid systematically large fiscal deficits. The existing stability and growth pact has proven insufficient. To ensure fiscal discipline that protects the public from irresponsible policies on the part of any government, the Eurozone requires an effective and enforceable control system," it declares.

Speaking at the same news conference in Brussels, Schroder advocated the adoption of so-called Eurobonds as a possible means of preventing a similar economic crisis in the future.

He also said that "difficulties" remained because the UK continued to remain outside the 17-strong eurozone countries and he also took a swipe at the German federal government over its handling of the crisis, saying that "mistakes" had been made at the start of the downturn.

"This diminished Germany’s influence but I now believe we are again on the right track," added Schroder.

Former Spanish PM Felipe Gonzalez, who has also signed the Institute's document, was also on the panel and was critical of the efforts of EU council meetings which have taken place in recent months.

He said, "I have never seen so many of these EU summits. Each one tries to deal with the latest crisis but the problem is that they are not preventing the next crisis.

"These summits are acting like firemen putting out a fire. But they are not preventing the fire happening in the first place."