EU Economy and Governance - Fondazione Collegio Europeo di Parma

Marco Ziliotti

Imagine being able to have a virtual purse, embedded in your smartphone – or computer – or in a card, allowing you to make payments accepted anywhere, without commissions or other costs (neither for you nor for the recipient); which would work even offline, in the most remote mountain retreat or when the internet goes down; which would allow, again without cost, to transfer purchasing power in real time to a family member whose wallet has been stolen while travelling abroad; which, unlike credit transfers, credit and debit cards, is not only, as mentioned above, free of charge, but does not even require a bank account; which, however, if you already have one, can allow you (via a so-called reverse waterfall mechanism) to draw on your existing funds; in short, a means of payment as simple and universal as cash, but which, unlike cash, thanks to its immateriality, can be used without physical transfer and held minimising the risks of fraudulent misappropriation.

In fact, there have been digital wallet systems on the market for years (including the most popular apps PayPal, Google Pay, Apple Pay, Amazon Pay), but first of all, their functioning depends on internet coverage and, moreover, they are instruments managed by private entities, mainly from across the Atlantic, which, among other things, take possession of all the information relating to the transactions carried out.

The digital euro, on the other hand, in the same way as the physical euro, will be a means of payment managed by an authoritative public institution, the ECB, with all the necessary guarantees (including that of having a ‘domestic’ manager, a non-trivial element in times of great geopolitical uncertainty). The legislative project for the establishment of a European CBDC (Central Bank Digital Currency) – similar projects in the US and China are, moreover, at an advanced stage – is contained in the ‘Regulation of the European Parliament and of the Council on the establishment of the digital euro’, which, after a preparatory phase that began in November 2023, envisages that in a year’s time the Governing Council of the ECB will move on to the operational phase, establishing the detailed methods and timing (rulebook).

The diffusion of the virtual European currency will therefore probably begin in 2026, with the obligation to accept it as a means of payment not only in the twenty countries of the Eurozone, but in all twenty-seven of the EU, with the well-founded expectation that in a short time, in the same way as the physical euro, the digital euro will also be accepted in all – or almost all – countries of the world.

The precise aim of the European authorities is that the digital euro should only be a means of payment and not a reserve of value (i.e. an asset in which to invest one’s wealth). To this end, it is envisaged that sums held in digital euros will not bear any interest and will be subject to strict quantitative limits at the individual level (businesses will only be able to receive it in payment). These constraints will also serve to avoid disintermediation effects and thus displacement of the banking system: bank deposits will continue to be the typical form of reserves of liquid assets.

This nature as a mere means of payment, and not as a potential speculative asset, also highlights how the digital euro is in no way comparable to cryptocurrencies (Bitcoin, Ethereum, Tether, Solana, etc.): these in fact, as is well known, have no guarantee of legal control, but rather systems based on distributed technologies, such as blockchain, and are typically used as forms of speculative investment, which are highly volatile.

The digital euro, on the other hand, will be subject to precise controls by the ECB, which, in accordance with its precise institutional mandate, will therefore have to guarantee its security – first and foremost against cybercrime -, the stability of its value and, no less important, the protection of privacy. The latter is a particularly sensitive issue: the frequent use of cryptocurrencies for illicit purposes suggests that digital currencies, like cash, may also be used for illegal purposes. It will be up to the intelligence of the regulator to find the right balance between fighting financial crime and economic freedom.

Translated with deepl edited by Edward Lynch

Alfredo De Feo

On 20 November 2024, the political groups in the European Parliament concluded a political agreement which, with reasonable certainty, will allow the new European Commission to take office, as last term, on 1 December. This vote puts an end to many months in which the European institutions’ attitudes has looked more inward than geopolitical. The election of Trump to the Presidency of the United States has given an acceleration to processes that in the past have been more complex.

For many observers, the behaviour of the leaders of the parliamentary groups appeared to be immature, dictated by concerns that are difficult to understand in the face of global urgencies and challenges, challenges that can only be faced with great unity.

The contrasts between the political groups, beyond identity and national positions, concealed a basic malaise: accepting the shift of the majority from the Europeanism we have known in decades to positions of a Europeanism, marked by a more invasive presence of the States, This new tendency is probably more in tune with the sentiments of a part of public opinion, which translated into the result in the European elections.

Ursula von der Leyen, immediately grasped this change, proposing to involve the conservative group, or at least part of the group, in the top positions of the Commission, being aware that in the next five years it will not always be able to count on the majority of the People’s Party, Socialists, Liberals and probably Greens but that, probably, she will also need the support of the more moderate right European conservatives. In addition, the appointment of a Vice-President of the Commission issue of the Conservatives should guarantee a more stable majority in the Council, where Italy’s weight is not indifferent. In fact, in the bicameral European architecture, the Commission, for any legislative act, will have to find the support not only of the parliamentary majority but also that of the Member States. The attitude of the President of the Commission denotes lucidity and political realism.

The European Parliament has largely demonstrated in recent years its central role in the institutional balance, it will be able to continue to be central provided that it maintains the ability to compromise even in the face of a Council, whose majority of States probably have a more national vision of Europe.

On the other hand, if we look at the last twenty years, the European decision-making process has become progressively more intergovernmental, reducing the influence of the Commission. The Commission that will have to accompany Europe towards 2030 will certainly be influenced by governments, many of the Commissioners are direct expressions of national governments and it is likely that these will condition the Commission’s choices more than in the past.

However, recent years have shown that the process of European integration can also continue through the intergovernmental method, with decisions taken unanimously, as for instance the Recovery and Resilience Plan financed with the guarantee of the national budgets. Although this type of funding is unlikely to be replicated in the short term, Member States may follow the same method to progress in the European integration. The concrete proof appeared at the informal European Council on 8 November 2024, where the Heads of State and Government invited the Commission to present a horizontal strategy on the deepening of the single market, towards a union of savings and investment and to make urgent progress on the capital markets union.

In addition, States ask to the High Representative and the Commission to present proposals to increase the efficiency of the European defence capability, in particular by appropriately strengthening the defence technological and industrial base.

To conclude, the new Commission will have to strengthen European credibility with proposals that can garner the consensus of all the States if possible, without forgetting that the Treaties provide that some projects can be shared only by a group of States, through the enhanced cooperation as for the Euro, or the Schengen Treaty, , obviously leaving the doors open to others to participate.

Pubblicato sulla Gazzetta di Parma 23/11/2024

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Category: EU Economy and Governance

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