This note argues that the Five Presidents’ Report outlines an ideal roadmap for the completion of the EMU since it identifies the necessary milestones. However, the report has limitations and ambiguities pertaining to the actual contents of each milestone and the process has not been endorsed at the political level. We believe that there is an urgent need to resume negotiations on a European Deposit Insurance Scheme, the fiscal backstops for the resolution fund, and eventually, the creation of a European safe asset—jointly guaranteed by the member states—capable of providing financial intermediaries and investors with a riskless instrument for the management of their liquidity. This instrument would also represent a tool for risk sharing and a source of cheap financing for the ESM and its activities in promoting the financial stability of the eurozone. The responsibility for managing this European financial instrument should be entrusted to a euro area Minister of Finance, in charge both of establishing the appropriate fiscal stance for the area as a whole, overseeing and enforcing the common economic and budgetary policies, and taking responsibility for the orderly management of the common debt instrument.
Italy has a paramount role to play in facilitating such progress, by restoring full confidence in its budgetary and economic policies and by attacking with determination certain weaknesses still plaguing its banking and financial system. Economic convergence and stable financial policies in Italy would open the way to mend financial market fragmentation and elicit substantial capital inflows from the rest of the euro area to support the needed recovery in private investment. A separate Policy Brief by the LUISS—SEP examines in greater detail the Italian policies and presents a proposal for a contractual agreement between European Institutions and Italy to overcome weak confidence and bring private investment back to life.