Corrado Macchiarelli, (2018), “Tackling the free rider problem in the EMU does not have to be a zero-sum game: Italy’s budget deficit case”, LSE EUROPP blog, 20 Νοεμβρίου
The biggest weakness in the bloc is now politics and the current approach to the Italian crisis is not going to help the popularity of either the EU or the single currency. As many have underlined, democratic expectations cannot be set at the same level as they are within nation states: the latter re-distribute 40-50 percent of GDP while the EU budget is a mere 1 percent of GDP. The legitimacy of the EMU is nevertheless key and the ‘politics’ beyond fiscal rules make the principle of ‘no taxation without representation’ more relevant than ever for the Italian political standoff.
Support for the euro has been rising in the past couple of years, but this is fragile. At the beginning of last year, the vast majority of Italians expressed discontent about the EU’s handling of the refugee crisis and the economy. Italy has currently a Eurosceptic majority (about 60 percent) according to Eurobarometer data. The badly designed budgetary plan in Italy needs addressing, and there is also a general need to cope with the logic that the EU now has stricter fiscal rules (including the excessive deficit procedure’s semi-automatic sanctions, implemented through reversed majority voting). But this notwithstanding, there is clearly a need for euro area reforms and more mutual recognition.
Practically, the instrument to achieve this would have to combine risk reduction at the EU/EMU level (for example through a Capital Markets Union) and the national level through lower sovereign debt (as part of the 2-Pack, 6-Pack and Fiscal Compact) with cap exposure by banks (see the IMF). This would require, at the same time, signalling at the EMU level for more concessions on complete risk sharing, through an explicit fiscal agreement. In other words, a policy that focuses on the stick and no carrot at the EMU level hasn’t worked in the past and will certainly not work in the future, particularly if the EMU is looking to create a consensus and convergence of (political) interests from the bottom.
Σχετικές Αναρτήσεις
- Kate Allen, (2018), «Italy stand-off raises concern of contagion», Financial Times, 19 Νοεμβρίου
- Ashoka Mody, (2018), «The eurozone is having an identity crisis and Italy will bear the brunt», Prospect magazine, 16 Νοεμβρίου