The time has come for a European Federation

By Viviane Reding, Vice-President of the European Commission
Today, European leaders will be meeting in Brussels to seal the future of the European Union.
It is a decisive moment for Europe. It is the moment to demonstrate to our citizens and to the
world that Europe has a strong determination to further integrate.

The crisis has triggered a very necessary debate about where we stand in Europe. One thing is
clear though: the way out of the crisis passes by consolidating our Union into a stronger, ever
closer and more perfect European Union.



We should realise that this crisis is firstly a  crisis of confidence. Just look for a moment to
the other side of the Atlantic: in May 2012 the debt mountain in the United States was 15,8
trillion dollars and 101% of annual GDP (while the euro zone average is at 91%). In 2012, the
United States will run an annual deficit of $1.1 trillion, or 7% of GDP (while the euro zone
average is at 3%). These figures show that the United States is clearly on an unsustainable
fiscal trajectory. It is not me who says it. It is the Chairman of the U.S. Federal Reserve, Ben
Bernanke. And yet, no one calls in question the single market of the United States or the
viability of the U.S. dollar. One of the reasons for this fact is that our American partners have
grown more than 200 years ago from a loose union  of states into a fiscal and a political
union. The foundations for the federal political union of the U.S. were set in 1790. After the
U.S. War of Independence, many of the U.S. states were heavily indebted. This fact led three
U.S. politicians – Hamilton, Jefferson and Madison – to agree over a dinner on the need to
mutualise, as a one-off measure, the states’ debt and to issue fresh bonds backed by the U.S.
Treasury. These bonds back until today the U.S. dollar, the U.S. banking system and the
global strength of the U.S. economy. Every citizen can see this when he enters a U.S.

bank today. Because under U.S. law, insured institutions are required to place signs at their
place of business stating that "deposits are backed by the full faith and credit of the United
States Government." This federal guarantee is why U.S. citizens trust that their deposits are
safe, also in times of crisis.

Over the years to come, Europe could choose a similar approach. European leaders
are currently preparing the blueprint for it. This should include, amongst others, a single
European banking supervisory authority and a European deposit guarantee scheme. The most
efficient way to do this would be to transfer the competence for the supervision of all
systemically relevant banks to the European Central Bank. This can be done on the basis of
our existing Treaties. Such a Banking Union should be backed by the  full faith and credit
given jointly by the euro area governments, and one day by a European Finance Ministry. In
the medium term, a Banking Union can only work if complemented by a full Fiscal and
Political Union.

Our destination in the coming years is clear: if we want to preserve and strengthen Europe's
position in the world, we need to turn our  Economic and Monetary Union into a strong
European Political Federation with a Monetary, Fiscal and Banking Union, covering at least
the euro zone, while being open to all EU Member States that wish to join. The answer to the
crisis is therefore more Europe.

Of course, changes will not happen overnight in the same way as Rome was not built in a
day. However, we now need a credible roadmap for turning this vision into reality by
2020.This week's European Council may very well become the European version of the
Alexander Hamilton dinner of 1790. European  Commission President Barroso has tabled
ambitious proposals, and I am confident that they will find many positive responses, including in the European Parliament, which is the democratically elected legislature of the European
Union.

However, achieving now a quantum leap in European integration requires from all Heads of
State and Government to look today beyond short-term interests and to see the bigger
picture. They will have to understand that in today's globalised world, sharing and
federalising sovereignty does not lead to a loss in democratic power. But to the only way of
maintaining democratic power in view of ever growing global challenges, starting from the
current financial and debt crisis to climate change.

Time has come for European leaders to show that the euro and the European Union – like
diamonds – are forever. And that they will not only weather the storm, but grow stronger. The
time has come to build a European Federation.

http://ec.europa.eu/commission_2010-2014/reding/multimedia/news/2012/06/20120628_en.htm