Authors Iain Begg | Gabriel GlÃ¶ckler | Anke Hassel ... - The Europaeum

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therefore, was weakening the European project in the eyes of Europe’s citizens. In the spring of 2008, the European Commission tackled some of these issues in its report on 10 years of EMU, 1 but its prudent approach to reforming economic governance in the euro area, was quickly put under scrutiny by the need for stronger action in response to the threat of financial collapse. The events of October and November 2008 will therefore be seen as a turning point in this soft approach to economic governance. During this period, European leaders first acted in isolation but then had to concede to the need for a much stronger coordinated response, which ultimately soothed the financial panic that consumed Europe. Since then, the debate on economic governance has increasingly departed from aspects of joint structural reform, and has focused on other important aspects such us the role of the European Central Bank, the need to harmonise banking regulation, the future introduction of a financial regulator, and most importantly, the need to reinforce coordinated responses led by the Eurogroup or the European Council itself. It is still early to extract conclusions, but it certainly seems that the financial crisis has managed to shift the existing debate on economic governance in Europe from issues related to coordination to those linked to further integration. This chapter analyses the criticisms and the solutions put forward for economic governance in Europe over recent years, and offers a brief reflection on the slight advances that were introduced under the Lisbon agenda. It ends with personal reflections on what lessons we might learn from the current financial crisis, offering some proposals for the road ahead. Debating the governance of monetary policy Of the three elements that compose the system of economic governance, monetary policy is the one which has received least criticism in recent years. The main objections that have been raised regarding the independent monetary policy of the ECB can be summarised into two points. On one hand, the ECB, by focusing exclusively on price stability, could heighten growth problems in the most important economies of Europe. On the other hand, it has acted “too independently” of Eurogroup finance ministers political viewpoints, and also from the opinions of markets regarding the value of the euro and its exchange rate. In addition, it has 78 After the crisis: A new socio-economic settlement for the EU
een unable to accommodate monetary policy with its fiscal stance, and to fulfill a role which makes structural reforms easier. 2 Basically, the solutions that have been proposed aim in the direction of including growth and employment within the objectives of the EU (and perhaps within the statutes of the ECB), and maintaining price stability, similar to the Federal Reserve in the US. There have also been some proposals to modify the method of selection of the Executive Board of the ECB as a result of the growing nationalisation to which the bank is being subjected. 3 Some authors have also defended the possibility of establishing an institutionalised mechanism for dialogue between the economic ministers of the EU (that meet in the Ecofin) and the ECB, so that they can agree every three years on the ideal inflation objective for the euro zone. 4 Fiscal fortitude: creating good governance This is the area where most scholars have expressed criticism in recent years. In some cases, the immediate implication of this criticism was that the monetary union would never work perfectly without a fiscal union. To fully understand these arguments, it is necessary to take a brief look at the original design of the fiscal policy pillar in the EMU. The negotiations which led to the Maastricht Treaty were dominated by the alternative visions of France and Germany regarding the role that fiscal policy should play in the monetary union. While France defended the creation of an “economic government” that would ensure the “essential” coordination of fiscal policies within the EMU, Germany put its emphasis on maintaining price stability through strong mechanisms of fiscal discipline. In fact, both positions were included in the Delors Report (1989) that stressed both the need to determine in a coordinated manner the fiscal stance of the EMU, and the need to limit the size of budget deficits. Finally, both requirements became the base of the two pillars (the pillar of coordination and the pillar of fiscal discipline) of the Maastricht Treaty signed in December 1991. Nevertheless, it is worth noting that the legal force of the pillar of fiscal coordination was much weaker than the legal force of the fiscal discipline pillar. 5 While article 104 of the Maastricht Treaty included a specific objective (the limit of 3%) and detailed a concrete procedure for sanctions for infringement (later reinforced by secondary legislature contained in the SGP), article 99 reduced the strength of the pillar of coordination by means of a general proposition. 6 Later, the creation of the Eurogroup in 1997 (only as an informal forum for discussion and under the Ecofin) to compensate Chapter 5 – Carlos Mulas-Granados 79
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Authors Iain Begg | Gabriel Glöckl
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Published in 2009 by Policy Network
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4 After the crisis: A new socio-eco
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6 After the crisis: A new socio-eco
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Simona Milio is associate director
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Chapter 10 Simona Milio ...........
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Before the crash: the EU as a parti
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liberalisation. The City of London
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of the Financial Services Action Pl
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confidence and world trade, to whic
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following the ECJ’s controversial
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signals are in place to promote a n
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need to be constructed to create ac
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or indeed re-impose, what they rega
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Page 34 and 35: Target financial stability The EMU
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Page 38 and 39: mortgage banks and the insurance se
Page 40 and 41: financial market rules. The ESFS au
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Page 44 and 45: initiatives vis-à-vis ratings agen
Page 48 and 49: Even if membership in a monetary un
Page 50 and 51: emained relatively contained to spe
Page 52 and 53: The second channel of functional sp
Page 54 and 55: But even so, the depth and intensit
Page 56 and 57: governance in the EU and the euro a
Page 58 and 59: in the EU show, authorities at the
Page 60 and 61: factors will remain prevalent and b
Page 62 and 63: centralised decision-maker. Similar
Page 66 and 67: (GNI), the interests of the member
Page 68 and 69: terms only very slowly and as a per
Page 70 and 71: policy proposal asks itself what th
Page 72 and 73: ensure that a ceiling is put on the
Page 74 and 75: Reform of EU expenditure Spending 4
Page 76 and 77: The medium-term financial framework
Page 78 and 79: unanimity. The need to obtain the c
Page 82 and 83: for the signing of the strict and d
Page 84 and 85: Since then, member states have name
Page 86 and 87: in the world monetary system. It al
Page 88 and 89: a Treaty that not only ignores trad
Page 92 and 93: Firstly, they should include policy
Page 94 and 95: emanate from demographic trends. Ho
Page 96 and 97: Furthermore, the Lisbon agenda may
Page 98 and 99: Strengthening, if not really crafti
Page 100 and 101: incentives in the welfare schemes a
Page 102 and 103: security, yet at a lower cost than
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Page 106 and 107: asis only in the 1990s, and over th
Page 108 and 109: in an increasingly global age the
Page 110 and 111: So what kind of social role for the
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Page 114 and 115: help by ensuring a thorough audit a
Page 116 and 117: irrespectively of benefit and costs
Page 118 and 119: to the European Innovation Scoreboa
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Page 122 and 123: to cope with change is germane to a
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Page 126 and 127: (74), and road vehicles (78). On th
Page 128 and 129: Towards a less dogmatic approach Wh
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128 After the crisis: A new socio-e
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will be reinforced rather than cont
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Where do we come from? The EU agend
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However, so far the flexicurity app
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existing practices of wage subsidie
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minimum wage tend to have higher pr
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commitment for employment”, 18 un
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provisions for minority protection,
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eflected in the objective of the Li
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instruments have been criticised fo
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However, the countries’ planning
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ich developed country pre-occupatio
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emerging markets (indeed the rules
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Energy and carbon use depend on fou
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concentrate on the size of the cake
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esurgence of long-term unemployment
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22 Financial Services Authority (FS
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7 This idea is not new. The 1970 We
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33 Arpaia, Alfonso, Declan Costello
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9 See Garabiol-Furet, M.-D. (2006)
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Chapter 11 1 Victor, D.G. (2006)
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Authors Iain Begg | Gabriel GlÃ¶ckler | Anke Hassel ... - The Europaeum

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