THE EUROPEAN ECONOMIC AND MONETARY UNION AFTER THE CRISIS: LESSONS LEARNED

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My latest book is out and, yes, this is the title…. and, yes, there are some lessons we have learned, even if some of us wouldn’t have waited so long… they were clear enough since the beginning.

The Economic and Monetary Union was an unfinished project already in the Maastricht Treaty. This was the topic of my first book!

Anyway, now, the evidence is there for everybody, impossible to deny.

The simple, plain truth is that we have in the Eurozone a monetary union (or, better, it is a monetary union), but we have nowhere an economic union. Yes, we have a customs union, a common market, and some important side policies, as common regulations on consumers and environment protection (which is great), but we don’t have any European fiscal policy, just a coordination of national ones. And we have a European tiny budget not up to the task of any reallocation or redistribution of resources, almost no tax harmonization, no European welfare and even less hope to save a State risking default. Every financial intervention to rescue the states in crisis was an attempt to cope with this lack of competence and tools. Sometimes it worked, but, even then, it was too little too late.

In my new book, I try to describe – as clearly as possible – the Maastricht compromise: a monetary union without fiscal union, somehow replaced by a set of budget constraints intended to keep the budgets under control but, still, fully national. Then, I analyze the rules and regulations adopted after 2010 to face the crisis and the evolution of the role of the ECB. Finally, I explore the possible solutions: the reforms which would make the Union (or the Eurozone) a fiscal union. Some of them have been suggested by institutions, experts, and academicians, some are just my attempts to connect the dots…

This is the flyer of the book, available, for now, only in Italian

locandina libro

And this is the English translation of the TOC, I hope there will be soon an English edition:

THE EUROPEAN ECONOMIC AND MONETARY UNION AFTER THE CRISIS: LESSONS LEARNED

INTRODUCTION

The crisis of the law and the law of the crisis

Chapter I: THE UNFINISHED MONETARY UNION

  1. At the origins of the Maastricht agreements.
  2. The dichotomy of models for economic and monetary policies.
  3. The regulatory model of economic policy: reasons and limits:
  4. a) the coordination of economic policies;
  5. b) the code of conduct;
  6. c) the principle of “no bail out”.
  7. The institutional model of monetary policy:
  8. a) the reasons for monetary unification;
  9. b) the European Central Bank;
  10. c) independence and a strict mandate.

 

Chapter II: THE CRISIS AND THE EMERGENCY SOLUTIONS

  1. The global financial crisis and its European edition.
  2. The heterogeneity of policy instruments.
  3. The verticalization of politics and the intergovernmental management of the crisis.
  4. The impact on the democratic principles of the Union and of the Member States.

 

Chapter III: THE EVOLUTION OF THE ROLE OF THE ECB

  1. The European Union is not an optimal currency area
  2. The ECB’s intervention in the crisis.
  3. The controversial legitimacy of its tools and the intervention of the EU Court of Justice.
  4. The role of a central bank: technocracy vs democracy

 

Chapter IV: THE MISSING TILE: THE EXTERNAL DIMENSION OF THE MONETARY UNION

  1. Europe’s role in global economic governance;
  2. The European Union and the euro area in the Bretton Woods institutions;
  3. The European participation in the groups of states;
  4. Who represents Europe?

Chapter V: REFORMS ON THE WAY, REFORMS NEEDED

  1. Two paths for reform: Rethinking the regulatory model of economic policy and making the Eurozone an optimal currency area;
  2. A Treasury and a Minister in charge for it;
  3. A European budget;
  4. Real own resources;
  5. Adjustment mechanisms for an optimal currency area:
  6. a) taxation;
  7. b) welfare;
  8. c) free movement of people

Chapter VI: THE DIFFICULT RELATIONSHIP BETWEEN THE UNION AND THE EURO AREA

  1. common and conflicting interests and goals;
  2. The unity of the institutional framework and its limits;
  3. How to stay together while respecting different views
  4. Possible scenarios after the Brexit

CONCLUSIONS

What if an economic union is also a good reason for a supranational democracy?

APPENDIX

A proposal: the European Agency for sustainable growth.

Manifesto: “A genuine European Union to ensure welfare, security, and democracy”

We European citizens are worried and scared. The economic and financial crisis has impoverished many of us. Youth unemployment risks creating a lost generation. Inequality grows and social cohesion is in peril. The EU is surrounded by war and instability from Ukraine to Turkey, the Middle East and North Africa. The flux of refugees and migrants has become a structural feature we must address together, in a human and forward-looking manner. In many Member states we witness authoritarian tendencies and the rise of nationalist and xenophobic forces. Democracy and the core values of the European modern civilization are under attack. The EU itself is questioned, although it ensured peace, democracy and welfare for decades.

We European citizens don’t want our national politicians to care only about their next local or national election. They ask for European solutions to European problems but then they act to render those solutions impossible or ineffective. They disregard sensible Commission proposals or fail to implement decisions already taken , including when agreed by all. They claim, one day, for Europe to do something and protest, the following day, Europe’s proposed actions. We ask national politicians and the media to stop depicting integration as a zero-sum game, thus pitting nations against one another. In an interdependent world no nation can satisfy all of its citizens’ basic needs and appeals for social justice. In this context, integration and supranational government is a positive-sum game. Our European social model based on liberal democracy and a social market economy can only survive in a multi-level framework of government, on the basis of the subsidiarity principle.

We European citizens are aware that globalization is transforming the world. We need a European government to foster our common values and contribute to the solution of the global problems threatening humanity. The world needs an outward-looking cosmopolitan Europe to help build a more effective and democratic global governance to cope with climate change, peace, global poverty, and the transition to an environmentally and socially sustainable economy.

We European citizens recognise the EU as an incomplete Res Publica. It has a ridiculous budget (0,9% of GDP) and no financial autonomy from Member states, while its current competences are out of date for what is necessary to successfully answer the challenges of the current crises. It has a federal like legislative, judiciary and central bank. But democracy is the possibility for citizens to choose the government and make it accountable. For the Union to work and be democratic its decisions, including budget, foreign and defence policy, and the reform of the Treaties, should primarily be taken by a qualified majority representing the majority will of European citizens and states. The Commission should evolve into a fully-fledged government, setting and promoting a political agenda legitimated through elections. European parties should present their candidates to the Presidency at the European election. The alternative is a directly elected President of the EU merging the Presidencies of the Commission and the European Council.

On 14 February 1984 the European Parliament adopted the Draft Treaty establishing the European Union, the so-called Spinelli Project, pointing towards a political union, which Member states disregarded. On 14 February 2017 we call upon the European Parliament, the only directly elected body of the EU, to take a new initiative to kick-start the EU on strengthened democratic basis. Talking about banking, fiscal, economic, energy, security, defence and political unions makes sense only within a genuine democratic European Union, with all those policies under a European government.

On 25 March 2017 the Heads of state and government will celebrate the Treaties of Rome establishing the European Economic Community and Euratom in 1957. We call upon them to match the vision of the Founders. They should open the way to the re-foundation of the EU on the basis of the European Parliament proposal, and immediately exploit all the Lisbon Treaties’ instruments to strengthen EU institutions and policies, especially on foreign and security, economic and social policies. We call upon the Europe’s youth, its civil society, workers, entrepreneurs, academia, local governments and European citizens to participate in the March for Europe in Rome on March 25. Together we shall give the political leaders the strength and courage to push forward the EU to a new beginning. European unity is key to solve our common problems, safeguard our values and ensure our welfare, security and democracy.

If you agree, please consider adding your signature to the ones by over 300 European intellectuals and academics. You can easily do it here.

You can also join us in Rome on March 25, the programme is here.

To Brexit or Not To Brexit

The nowadays famous article 50 of the EU Treaty didn’t exist before the 2009 Lisbon reform.

The founding fathers’ vision of an ever closer union didn’t contemplate a way back … or a way out. The marriage had to be for life. But then, after the big enlargments in 2004 and 2007, some practical minds decided to foresee the possibility of a divorce.

And here we are, with a divorce we didn’t expect to see.
As a British colleague made me notice, the 48% of the voters who expressed the will to remain are not parties in this divorce process, they are the victims: the children.

And the divorce is not formalized yet and this doesn’t seem to happen anytime soon.

Those who say that enacting art.50 is a competence of the British parliament are certainly right, as the  parliament ratified and enforced the European treaties in the British legal order and cannot be bypassed by the goverment, repealing these acts. By the way, both the parliament and the government  look reluctant as they didn’t really want this outcome.

Those who say that the will of the citizens cannot be ignored are right too. It is absolutely reasonable that such an important decision should require a larger majority, but there wasn’t any rule about it and a majority won.

Both the fields -the Brexit supporters and the remain supporters – have solid arguments on their side.

But there isn’t only the British membership of the European Union at stake. That would be too simple an assumption.

The remain voters are not necessarily supporters of this Union, which has its own undeniable flaws. Most of them stand for an idea: being united with our  diversities, being  stronger together, being peaceful as a family which solves its own divergences discussing at a common table.
Most of them know that the Union is a work in progress which can be improved only from the inside. And they know there is much to gain from the EU’s open borders and European citizenships’ rights if you are willing to move, explore and challenge yourself and your national limiting beliefs. They reasonably don’t want to lose these rights.

The Brexit  voters come from a range of different experiences:

  • Some of them  have suffered and still suffer austerity;
  • Some identify Europe with a suffocating bureaucracy and  a political failure, which is how Europe as been sold to British people for decades: as a useful scapegoat.
  • Some expressed a feeling of antipolitics, they would probably have rejected any political establishment and just prove the  crisis of democracy we all see around us.
  • Then there are the champions of national sovereignty, and all sorts of nationalism.
    This feeling has been fueled by the huge migrations from the southern shore of the Mediterranean. It is a real emergency and nationalist attitudes won’t help to find a solution whatsoever. But still we can understand where this feeling comes from: fear. Fear of invasion, fear of sharing already meager work opportunities and national resources.
  • Finally, some think that a free rider state will thrive on the global market, possibly a more and more deregulated global market. This is a completely different attitude, but still anti-EU. And more than the other views it looks anti-historical as the world goes in the opposite direction: solving problems which become more and more global will require more integration, not less. Even little tax heavens are (finally!) under threat of extinction.

    I am totally empathetic with the “remain” voters and still, while I wish the best outcome for them, I wonder if a Brexit is politically avoidable.

    However the dilemma will be solved, some lessons need to be driven:

    ⁃       austerity has not been the solution to the financial crisis. In some countries it even worsened the economic situation. In many states unemployment is still at record level. The price was especially paid by the weaker part of the population, poverty and inequality provided a good soil for populism and nationalism. Moreover, it has been errouneously attributed to Europe, while it was a national solution (as I already explained).
    ⁃       There is a crisis of democracy and a rise of antipolitics almost everywhere. I have my theory about that: the nation states are not anymore the right institutional framework for tackling most of our problems, we need to go more local and more global at the same time. But – be right or wrong my explanation – we need a serious reflection on our contemporary democracies.
    ⁃       Finally, we need to work for a better Europe, we owe this to those who voted against it as to those who voted in favour. I have written about this and for sure I will write more extensively in the future. I’ve already been too long!

    For those who arrived to the end of my reflections: these are challenges not just for polical elites, not just for governments and states, but for all of us. And this is a call of duty for new brave political leaders at all levels.