SPINELLI FORUM 2016 – The Future of the Euro: Is Another Way Possible?
Summary of the discussion on the future of the Euro which took place in the second session of the “Spinelli Forum 2016 – Europe and Nation States: Friends of Foes?”.
“The single currency cannot be an aim in itself, but an instrument to achieve wider objectives“, said Mr. László Andor, opening the discussion on the future of the Euro during the “Spinelli Forum 2016 – Europe and Nation States: Friends or Foes?”. The former European Commissioner for Employment and Social Affairs welcomed a panel composed of Ramona Coman, Director of the ULB Institute for European Studies, the IEE Professor Amandine Crespy and Paul Jourion, Financial Columnist and Associated Professor at the Université Catholique de Lille. In the second session of the Spinelli Forum, which gathers every year experts and professionals of EU affairs to debate on the most urgent issues faced by the Union, the panel discussed about the future of the Euro, by analysing its shortcomings and proposing some fresh ideas to reform its governance.
“If the European market fails, consequences can be unpredictable”, cleared Mr. Andor at the end of his brief introduction. All the members of the panel seemed to agree on this point. “We need to be able to unify the system and to explain to European citizens that to move forward with the Euro is a must”, explained Paul Jourion at the beginning of his intervention. However, achieving this objective seems hardest than ever in these times of recession and crisis for the European Union (EU). On the one hand it is clear that “the best way to appease citizens’ resentment towards the common currency is the full employment” (Jourion) and yet, today such a solution seems hardly reachable as the Economic and Monetary Union (EMU) is stuck between fiscal rigour and slow growth. “Austerity policies are very short term strategies as they reduce salaries and bring about cuts to the social welfare”, argued Pr. Jourion. What is more is that, according to Pr. Jourion, austerity has to be seen as one of the main causes of today’s high Euroscepticism: “Austerity measures, by hitting ordinary citizens, are actually boosting citizens’ anger and thus spreading anti-EU populism across Europe” he stated.
Some countries in the EMU seem indeed unable to recover from the crisis on their own, however the EU and its austerity plans put them at the heart of a vicious cycle: owing to their structural problems these countries are obliged to follow the rules of fiscal discipline; they are not entitled to allocate their budget to favour economic growth; as a result their economies stagnate and their public debt increases even more. That is why the paradigm of austerity should be no longer valid in the EMU, most of all in time of recession. “We need to explain to Germany what is going to happen if we fail in building a common currency based on reciprocal solidarity”, Pr. Jourion said.
During the discussion, Pr. Jourion, underlined the roots of the present hurdles faced by the Eurozone on its way towards economic integration: “the Euro is a good idea, but it has to be built on strict rules”, he said, complaining about the fact that since the beginning “some member States, such as Greece and Italy, were let in the EMU even though they didn’t match the necessary economic requirements”.
However, this does not necessarily imply that the Eurozone is doomed to failure. There is room for new solutions, but time is running out. “I believe we should have a federal Europe, where the richest countries support financially the poorest ones”, proposed the Professor from Lille University.
The intervention of Pr. Crespy followed a similar line: “More integration is needed, not less” he argued. He also mentioned amongst the current problems of the Euro the fact that “in the Eurozone there is an omnipresent paradigm of competition rather than an idea of cooperation among Member States”. According to her, the recent crisis revealed that governing the Eurozone through fiscal discipline is counter-productive, rather than a solution to the EMU problems. Indeed, a so-called one-size-fits-all approach based on austerity and the myth of sound budget in each member State (MS) is not a guarantee of economic convergence. To the contrary a blind recourse to austerity measures in every situation can damage national economies and trigger recession, especially when MSs face assaults by international speculators. “Apparently there is a consensus in the Eurozone on the fact that the costs of economic integration should be born by the European periphery”, affirmed Pr. Crespy pointing at the highly deficient financial solidarity obtaining at the moment within the EMU.
Another issue regarding the Euro and the EU more broadly, according to Pr. Crespy, is the lack of a common social policy. “Remember the line: the EU should be ‘big on big things and small on small things’? Well, Social Pillar seems to be ‘small thing’”, Pr. Crespy argued. The professor then pointed the nowadays inaccurate division of tasks between the supranational and the national level: the EU takes care of economic poly while Member States deal with their own social policies. “However”, she argued, “this distinction is clearly a fallacy”, since “the European model has had a huge impact on national social policies, and the two aspects are now deeply interlinked”. Moreover, “there is a urgent need to restore the fiscal capacities of member States and EU institutions”.
The last issue evoked by Pr. Crespy was the democratic deficit within the EU, in particular in the Eurozone governance. Indeed, ragarding that matter, decisions concerning the common currency are often -if not always- taken behind closed doors during Eurogroup meetings (which gather Economic and Finance ministries of the Eurozone MS) or the European Council. Looking to the future,“the EU needs more progressive policies and a better democratic procedure” Pr. Crespy concluded while describing two possible directions for a truly progressive agenda at the European level. On the on hand the EU should pursue a kind of “growth which is compatible with people welfare and the environment”. On the other, “a switch from competition to cooperation among member States” is required as a starting point.
For her part, the IEE Director, Pr. Ramona Coman, analysed the current characteristics European Semester, a form of governance based on “cooperation” and recently introduced within the EU. Pr. Coman reminded the strong political implications of the European Semester for national governments. Indeed, “MS budgets are submitted to the European Commission for revision, before even being discussed in national parliaments”, Pr. Coman underlined. Moreover, as the recommendations emitted by the EC do not stem from an elected body and are not voted upon, it reflects a problem of political legitimacy – and democratic accountability – in the current rules regarding the Eurozone governance. A solution could be found in involving the European Parliament in the decision-making process of the EMU: Pr. Coman argued that “a vote from the EP on European Semester recommendations could be an answer to the actual democratic deficit within the Eurozone”.
To sum it up, all of the three interventions emphasised the lack of an effective democratic procedure in the governance of the Euro as one of the main issues of the common currency. Another aspect often underlined during the discussion, notably by both Pr. Jourion and Pr. Crespy, was the counter-productive effect of austerity measures. As such, a question seemed to flow naturally from the discussion: is there another possible way for managing the Euro? Is it conceivable to imagine a bright future for our common currency? The panel of the Spinelli Forum definitely gave a positive answer to that question provided that a real change is pursued. As Pr. Coman stated: “Nowadays European integration is brought into question, we need to take advantage of this moment to ask us the good questions about the future of the EU”.
Matteo Guidi 2nd Year Master Student Institute for European Studies (ULB)