BRUSSELS (Reuters) - The European Commission will present ideas on Wednesday on how to help countries sharing the euro to integrate more effectively over the next two years, including the way they manage banks and budgets.
Proposals for a deposit guarantee scheme and bodies to monitor economic competitiveness and fiscal performance are part of a broader scheme to complete the Economic and Monetary Union (EMU) under which 19 of the European Union's 28 countries already share a currency, a central bank and budget rules.
The euro zone needs to become more integrated, the Commission says, to deal with crises such as the sovereign debt troubles that shook the bloc's foundations.
Seeking to tackle widely differing economic performances, the Commission will propose that every country should set up a Competitiveness Authority that would be independent, but democratically accountable.
The exact set-up of such an authority would be up to the individual country, but trade unions and employers should use its opinions as guidance during wage-setting negotiations.
The Commission will also propose a European Fiscal Board, an advisory body that would coordinate the work of existing national fiscal councils created in euro zone countries under the Fiscal Compact treaty of March 2012.
The European board would, like the national bodies, be independent and provide economic advice on the best fiscal stance at both national and euro zone level, taking into account the EU's fiscal rules -- the Stability and Growth Pact.
Because EU budget rules have become very complex, the Commission will propose eliminating redundant or overlapping steps.
To complete the EU's banking union, under which euro zone banks already have a single supervisor and a single mechanism for resolution if they get into trouble, the Commission will propose an EU-wide bank deposit guarantee scheme.
While detailed, legislative proposals on it would only come towards the end of the year, officials said the scheme would be based on national deposit guarantee schemes and a separate, pan-European fund that would act as re-insurance for them.
Banks would pay contributions into both their national and the EU-wide fund, but the EU money could only be tapped once the national deposit fund was fully funded, thus limiting the risk that countries without money to safeguard their savers could abuse the system -- a key demand of Germany.
Before such a deposit scheme can be implemented, however, all countries will have to put into national law an EU directive on bank recovery and resolution (BRRD) - how banks can be rescued or wound down.
The BRRD law is critical to the success of monetary union because it makes bank shareholders, bond holders and even large depositors liable for the bank's losses before any public money is spent to save the institution.
Finally, the EU executive arm will propose merging the representation of euro zone countries at the International Monetary Fund, now spread over nine constituencies, into a single euro zone seat, with a strengthened role for the chairman of euro zone finance ministers -- the Eurogroup President.
These proposals all need the approval of euro zone governments and in some cases the European Parliament -- hence the two-year implementation schedule.
Reporting by Jan Strupczewski; Editing by Ruth Pitchford