Crowley, M. (2015) ‘More Europe’ in 2015? For the EU, relevance on the world stage starts with common economic and security policies, US News and World Report, 21 January.
The new year brought news that in the third quarter of 2014 the United States experienced its strongest annual growth – five percent – since 2003. Meanwhile, the European Union stagnates, managing only a 0.2 percent growth rate for the same period. Economists and policymakers are pressing for a stronger coordinated response to the EU’s economic doldrums. Such a response ultimately involves expanding the EU’s common economic policy to include fiscal policy. The original eurozone plans developed only a common monetary policy, which Euroskeptics saw as a potentially fatal shortcoming at the outset. Proponents of an expanded common fiscal policy to shore up the EU economy represent the latest call for “more Europe” in response to the region’s challenges. They make a strong case that it would be a good thing.
In a new e-book, Rebuilding Europe’s Common Future, authors from the Peterson Institute of International Economics prescribe fiscal policy reforms to spur Europe’s economic recovery. Politically, they face a perception problem recognizable in the U.S. recently. It is the argument that John Maynard Keynes pioneered: How to advocate for government to spend its way out of a downturn caused at least in part by overspending. In Europe, however, the conservative-liberal division on the proper role of government and how much economic reform to pursue in a crisis is compounded by fears of hyperinflation that have historical roots. In the U.S., bank failures and excessive debt are viewed as policy crises; in Europe, they are remembered as preludes to conflict.
The Peterson Institute of International Economics authors argue for building on progress in banking reform that has led the current expansion in EU authority. The European Central Bank has assumed regulatory authority over Europe’s banks in hopes of limiting the scope of future financial crises, and ensuring a collective response to them when they come. The change is aimed at shoring up confidence in the EU’s financial sector, freeing lending and increasing investment. Tellingly, however, the move is also seen as a referendum on the value of EU institutions. Nicolas Veron, in a piece discussing further steps the central bank could take in shoring up the EU’s banks, cites the significance of its actions to date for the EU’s overall development, writing that “the unanimous decision of euro area member states in late June 2012 to initiate this union by pooling their sovereignty over banking policy at the supranational level, and to entrust the corresponding supervisory authority to the [European Central Bank], signaled their political solidarity and commitment to the integrity of the euro area.”
Relevant posts:
- Schweighofer, J. (2014) “It’s Now Or Never: More Social, Less Europe in 2015!“, Social Europe Journal, 17 December.
- Smith, Y. (2014) “Germany and the European Commission’s €315 Billion Infrastructure “New Deal” is Yet More Smoke and Mirrors“, Naked Capitalism Blog, 26 November.
- Mezn, George, Smith, Mitchell P., (2013), “Kichking the Can Down the Road to More Europe? Salvaging the Euro and the Future of European Economic Governance”, Journal of European Integration, Vol. 35, Issue 3, p.p. 195-206