A comprehensive fiscal union or Lisbon with sticks and carrots?

expert workshop to discuss fiscal capacities and models of economic governance

Guests

Robert Strauss, Head of Unit A/1 “Employment Analysis”, DG for Employment, Social Affairs and Inclusion, European Commission

Wolfgang Merz, Head of ECOFIN/Currency Union & ECB Division, Federal Ministry of Finance, Berlin

Daniela Schwarzer, Head of research division for EU integration, SWP

 

Michael Emerson, Associate Senior Research Fellow, CEPS 

Alessandro Giovannini, Associate Research Assistant, CEPS

Gustavo Piga, Professor of economics, University of Tor Vergata, Rome

Iain Begg, Professorial Research Fellow, European Institute, London School of Economics

Stefan Huemer, Adviser at the European Central Bank

Chaired by

Sebastian Dullien,Senior Policy Fellow, ECFR

Nathalie Tocci, Deputy Director, Istituto Affari Internazionali, Rome

Expert workshop

 

“A comprehensive fiscal union or

Lisbon with sticks and carrots?”

 

A new model of economic governance for Europe

 

Tuesday, December 10th, 2013

11:00 – 15:00 h

 

Landesvertretung Schleswig-Holstein

In den Ministergärten 8

10117 Berlin

 

In light of the EU’s inadequacy in coping with its internal imbalances and helping troubled countries solve their structural problems, member states are deeply divided over the recipes for remedies in both the Eurozone and the EU as a whole. Should we move towards a genuine fiscal union or rather content ourselves with “Lisbon with sticks and carrots”? On 10th December, an expert workshop hosted by the ECFR and the IAI assembled experts from national, European, and independent institutions to bring light into the affair. 

What is the proper balance between automatic stabilisers and contractual arrangements? What volumes are necessary and where should the money come from? Those were the questions that Sebastian Dullien, ECFR Senior Policy Fellow, asked the first panel, which consisted of Robert Strauss (European Commission), Wolfgang Merz (German ministry of finance), and Daniela Schwarzer (SWP).

 

The panellists largely agreed that only a mix of both contractual measures and supranational stabilisation mechanisms could give durable stability the European economy. However, opinions on the feasibility of such a combination varied. The Commission is under pressure from national governments and as such is unlikely to go beyond the 2012 “Blueprint for a deep and genuine EMU”. The main obstacle remains the unpopularity with voters in the Northern countries of any automatic mechanisms channelling funds to the ailing South. Another concern is the lack of communication between Brussels and Berlin, as well as a perceived under-representation of German positions in the Anglo-Saxon media. The participants concluded that the most important challenge is to convince the European public of the benefits of fiscal, economic, and financial sector survey integration.

 

A second session in the afternoon looked at possible models of economic governance for the Union after the crisis. Michael Emerson and Allesandro Giovannini of the CEPS presented two recent IAI publications proposing a framework for the future of the EMU. Accordingly, the banking and fiscal union will first and foremost require “unity and effectiveness”. In the following discussion chaired by Nathalie Tocci (IAI), panelists Gustavo Piga (University of Tor Vergara), Daniel Gros (CEPS) and Stefan Huemer (ECB) looked at potential strategies for a reform of the EMU. In an environment where the European Council seems to be taking the lead, the ECB is acquiring new functions and contractual rules are trumping discretionary policy, major political leadership from the national governments will be necessary for any progress towards a more federalist fiscal structure. In any case, quick fiscal and monetary measures must be undertaken to buy time and hereafter tackle the political, constitutional, and financial challenges lying ahead.