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Is the recasting of economic governance of Europe beset by intractable economic, political and institutional conflicts?
Since 2007, the EU has had to contend with a series of crises requiring a combination of rapid reaction and more fundamental reform of the governance framework. These imperatives have called into question the manner in which rules and governance initiatives are negotiated and decided. When the euro was created, it was partly as a solution to the “impossible trinity”, identified by Robert Mundell, of simultaneously having free capital movement, a fixed exchange rate and independent monetary policies, especially when economies are closely integrated. However, other economic “trilemmas” arose during the crisis years.
Some progress has been made through the many recent governance reforms in resolving these, but the flaws in the architecture of euro governance revealed by the years of crisis have exposed further incompatibilities in the political economy of the EU, with damaging effects on the scope for rapid and effective reform. Rather than the “community method” of initiatives led by the supranational institutions, much of the policy response has been inter-governmental, leading to tensions between national political accountability and the need for collective solutions. A second “trilemma” arises from how subsidiarity as a principle interacts with blame-shifting to the EU and national political stability. Further incompatibilities arise in relation to global economic governance because of the dispersion of responsibility among EU Member States and institutions for representation of the euro in international settings.
The focus of this event will be on whether there are ways round the various incompatible economic and political trinities, and, if so, what they imply for the next stages of reform of euro governance. The “Five Presidents’ Report” from 2015 set out a range of measures for completing economic and monetary union, but progress on them has been slow. Among the themes of the panel discussion will be what is needed to break the apparent deadlock. A background paper co-authored by Marco Buti is available for downloading, and there is an earlier paper by him discussing the economic incompatibilities.
Marco Buti has been Director-General for Economic and Financial Affairs at the European Commission since December 2008, after a 6-month period as acting Director-General. After studies at the Universities of Florence and Oxford, he joined the European Commission in 1987. He held various posts as an economist in DG ECFIN and the Commissioner's cabinet (private office) before taking up a post as an economic adviser to the Commission President in 2002-03. In 2003 he returned to DG ECFIN as Director for the Directorate for economies of the Member States, and in September 2006 was appointed Deputy Director-General.
He has been at the forefront of the efforts to reform the governance of the euro area and to deal with the consequences of the years of crisis. He has published several books and many articles on European fiscal policy and the challenges of coordinating economic policy in a monetary union.
Paul de Grauwe is John Paulson Chair in European Political Economy at he the European Institute. He is also director of the money, macro and international finance research network of CESifo, University of Munich. He is a research fellow at the Centre for European Policy Studies in Brussels and the Centre for Economic Policy Research, London
Mareike Kleine is Associate Professor of EU and International Politics at the European Institute. Her research interests include theories of international organisation and International Political Economy, informal and formal governance, the interplay of domestic politics and international institutions, negotiation theories and normative questions of global governance.
Iain Begg is a Professorial Research Fellow at the European Institute. His main research work is on the political economy of European integration and EU economic governance. His current projects include studies on the governance of EU economic and social policy, the EU's Europe 2020 strategy, evaluation of EU cohesion policy and reform of the EU budget.
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