World Oil Outlook - Opec

Domestic Product (GDP), Italy and Spain combine for almost 30%, and globally
close to 5%.
Two major institutional initiatives can be viewed as important in preventing a
further deterioration of the crisis.
Firstly, a proposal for a tighter integrative approach, including more burden sharing,
was delivered by the European Council in June. This blueprint for EU integration
relies on four major building blocks: financial integration, budgetary
integration, economic integration, and democratic accountability and legitimacy.
It has been acknowledged, however, that this integrative approach would require
modifications to the EU’s founding treaties and that full implementation of this
approach would require a timeframe of around 10 years.
A more specific and time-bound roadmap for achieving a genuine economic and
monetary union is currently in the works by the European Council. While the
agenda put in place improved the sentiment of sovereign debt investors to some
degree, it is still at the very beginning of its implementation. This agenda is a
prerequisite towards a sounder and deeper economic integration of the still heterogeneous
Euro-zone structure. However, a major challenge could be garnering
broader political support as these changes will require referenda in several Eurozone
economies. Eurosceptic movements have gained some momentum in 2012,
which could potentially put the project at risk. As a major focus and building
block of the blueprint, it has been acknowledged by the European Council that
greater democratic legitimacy and accountability is required to win a broad consent
for decisions that are being deployed from Brussels to Member States.
The four building blocks of the political integration for the EU are designed
to create a banking union with a centralized banking supervision, including a
deposit guarantee scheme (financial integration); common decision making on
national budgets (budgetary integration), with the ultimate goal of introducing
Euro-bonds and a common treasury; a coordinated economic policy (economic
integration); and advancing the involvement of member states in decision making
at the supranational level (democratic accountability and legitimacy).
The launch of the European Stability Mechanism (ESM) in October 2012 constitutes
a significant step towards this integrative approach, with the ESM set to
act as a fiscal back-stop and deposit guarantee authority. The ESM will replace
the European Financial Stability Facility (EFSF) by 2014, when the ESM is expected
to have reached its total funding capability. The EFSF will continue to
provide an additional €240 billion in the intervening period.
33
Chapter
1