Where Next for Eurozone Governance?
A new research paper from Policy Network on the quest for reconciling economic logic and political dilemmas.
The story of crisis management in the Eurozone has been one of politics and economics pulling in somewhat different directions: the rationale for deeper integration seems overwhelming; yet the popular approval has been found wanting.
For the Eurozone to overcome its current malaise, it urgently needs to realign the competing economic and political objectives. This demands a clearer understanding and examination of the three main strategies for a crisis resolution in the medium term:
1. A beefed-up “insurance-adjustment” strategy, drawing on and seeking to improve what EU leaders have implicitly been trying to do for two years ;
2. A downsizing of the Euro Area to make it a ‘more optimal’ currency area ;
3. Some form of fiscal federalism implying a Eurobond, a banking union, a finance ministry.
Yet, in confronting these strategic choices, EU leaders must urgently address the resulting political trade-offs and dilemmas, including:
• The tension between EU socio-economic diversity and the logic of downward convergence;
• The different institutional routes at hand, between a Community-based EU and intergovernmental pressures;
• The democratic risks associated with any further move towards integration in a weakly legitimated Union.
About the authors
Roger Liddle, Olaf Cramme and Renaud Thillaye are respectively chair, director and policy researcher at Policy NetworkThe quest for reconciling economic logic and political dilemmas
Welfare, Wealth and Work for Europe Project
This discussion paper is a longer version of a forthcoming policy brief for the ‘WWWforEurope’ project, a four year research initiative led by the Austrian Institute of Economic Research (WIFO) with the objective to identify the conditions for a successful socio-ecological transition in line with the Europe 2020 strategy for smart, sustainable and inclusive growth. The research leading to these results has received funding from the European Commission’s Seventh Framework Programme FP7/2007-2013 under grant agreement no. 290647.
For more information on this project, visit www.foreurope.eu.