Authors Iain Begg | Gabriel Glöckler | Anke Hassel ... - The Europaeum

financial institutions. More recently, the Commission’s proposal for an
EU-wide fiscal stimulus has been shot down by finance ministers who
insist on national measures, which, at most, should be aligned to an EU
wide “menu of options.”
Financial crisis was special, other policy areas
are different
The nature of the financial system – its increasing interconnectedness
across borders, and its fundamental importance for the functioning
of the modern market economy – mark it out as a special sector of the
economy. Financial globalisation in general, and European financial
integration in particular, created increasing vulnerabilities and mutual
dependencies between financial institutions, markets and infrastructures
across national borders. In addition, the contagion effects created by
complex structured finance products that are capable of transferring risk
across financial institutions and markets, and the immediate impact of
systemic pressures across countries all implied that the fall-out of financial
market pressures or the failure of a systemically important institution
in one country was rapidly felt across other countries. The result was a
congruence of direct and indirect pressures on policymakers to (re)act,
and to do so in a coordinated manner. Incidentally, similarly common
shocks in other sectors that seemingly affect all member countries equally
do not inescapably engender similar pan-European responses. The debate
over the EU ambitions on climate change (and, crucially, their financing)
provides a case in point. Precisely because financial markets are “special”,
the European cooperation experience from the ongoing crisis cannot be
generalised.
Crisis showed limits of European solidarity
The various government and central bank actions to stem the detrimental
impact of the financial crisis, while purportedly demonstrating the
capacity of the euro area – and other advanced economies – to look after
themselves, also revealed the limits of the willingness to extend such
solidarity to other parts of the EU, notably the new Member States. The
slow response in extending assistance to countries in particular distress,
such as Hungary, Latvia, Bulgaria, Poland, but also EEA member Iceland,
and the insistence on joint actions with other international institutions
(like the IMF), clearly displayed that the scope and depth of European
cooperation has its limits.
All these arguments relate, mainly, to the supply side of coordinated
policy responses at EU or euro area level, which shows that this supply
is evidently limited. It is, however, reasonable to forecast that demand
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