The euro zone will not survive unless it becomes both more integrated in policymaking and more disciplined, European Commission President Jose Manuel Barroso said today.
"Without this increased integration, convergence and discipline, we will not be able to sustain a common currency," Barroso told the European Parliament.
"Either member states accept it – to complete the monetary union with an economic union that requires full discipline, full convergence, full integration – or if they don't accept this we will put at risk our goal," he said.
He said that once this greater integration and discipline are achieved, it would be natural for the 17 countries sharing the euro to issue debt together – what he called "stability bonds". The Commission will present a proposal on such bonds later this month.
"Such bonds could, if well designed, strengthen financial stability and fiscal discipline in the euro area and thus... sustainable growth and job creation Europe as a whole," Barroso said.
Germany, which has the lowest financing costs in the euro zone, fiercely opposes any joint debt issuance. But Barroso said new instruments were needed to fight instability.
"There are no miracle solutions. We have got some kinds of instruments to fight the current financial instability in Europe. If we want to keep a common currency, something more is needed, in terms of the common instruments to fight this financial instability," he said.
He also sounded skeptical about ideas involving large emerging market economies, such as China, in helping to fund the euro zone bailout fund, the European Financial Stability Facility (EFSF).
"The truth is that next to the United States, the European Union is the richest region in the world. And yet some are suggesting to depend on much poorer than us, emerging economies, countries that are much poorer than us indeed, to rescue the European Union. I find it rather strange," Barroso said.
"The reality is stark: we have the resources in Europe to respond, provided there is the political will. The reality is that our member states spend more than what they receive from taxpayers. This is the reality," he added.