www.worldcommercereview.com Schäuble visionsofeuroSchäuble Beyond theJunckerand identifies newideas to develop area governance Two opposedversions diametrically oftheeuro area architecture have beenproposed. Guntram Wolff area governance www.worldcommercereview.com needs afire even brigade whennofire isburning. According tothisplan,theEMF would havecrisis aclear preven- to transform theEuropean Fund into Mechanism apermanent European Stability Monetary (EMF)–theeuro area By contrast,By Schäuble’s vision bility andGrowthbility Pact (SGP) the andthememberstates ontheirnational fiscalpolicies, basedona ‘political’ interpretation ofthe Sta- Eurogroup, presiding over aeuro oftheEuropean area budgetandgiving budgetthat recommendations ispart to , withaCommission vice president whowould betheeuro area finance minister, the chairing have proposed competing visionsofeuro area governance. For Juncker, thecore ofthevisionisastrengthened European Commission president JunckerandGermany’s Jean-Claude former finance minister WolfgangSchäuble Competing visionsofeuro area governance: Juncker versus Schäuble EU budgetshouldbereformed to focus onEuropean publicgoodsandonastabilisation function. manent fire brigade to managesovereign debtcrises, in cases.extreme includingpossible restructurings Finally, the tions. Ultimate responsibility for debtwillremain national. The European shouldbecome Mechanism aper Stability Political, pressure andinsomecasesmarket, would increase oncountries that failto comply withrecommenda- rules would be reformed. to theEuropean Parliament. The Commission wouldrecommendations makefiscalpolicy to memberstates; fiscal full-time president, withamandate to represent theinterests ofthewholeeuro regularly area, andwhowillreport rosystem (EFP)asthe centre offiscalpolicy ofeuro area fiscal governance. The Eurogroup should have apermanent, interests. from bothJuncker’s Departing andSchäuble’s proposals, theEurogroup shouldbedeveloped into aEu- intheeuroFiscal area making act between willremainnational politicsand European adifficultbalancing policy Policy challenge 1 . 2 is clearly motivated isclearly by amistrustoftheEuropean Commission. proposes Schäuble - www.worldcommercereview.com Source: Bruegel A Eurosystempolicy offiscal www.worldcommercereview.com regards thenumerous spillovers from European fiscalpolicymaking. nores thereality ofthe strong intergovernmental nature ofEuropeancoordination,Schäuble dis- fiscalpolicy while These visionsoftheeuro area architecture are opposed–andbothare diametrically flawed. Juncker’s proposal ig- would play a ‘stronger, neutral’ role. pliance with fiscalrules.Schäuble’s mistrustofthe European Commission is expressed inthe wording that theESM Eventually, theFiscal andESM Compact Treaty would bechangedsotheESMwould fullymonitor euro area com- ESM would ‘gradually’ beputincharge ofmonitoring theSGP tion mandate comparable Fund’s butmore far-reaching thantheInternational Monetary IV. Article particular, In the complexity of the task the of complexity full-time job, but this view seems to disregard the the disregard to seems view this but job, full-time full time position; it has been argued that it is not a a not is it that argued been has it position; time full President of the Eurogroup should be a permanent, permanent, a be should Eurogroup the of President 3 . www.worldcommercereview.com that might want to takeapoliticaldecisionto therecommendation? reject ofthecouncil asthechairperson losingher/hisauthority mendation andthenrisk basedontheEUlegalframework, would ofinterest. alsoleadtoIt conflicts How could the European Commissioner/finance minister issuea recom- of chairthecouncil andcommissioner would upsetthisfinebalance. the Council oftheEuropean UnionandtheEuropean Parliament thefinalsay onlegislation the context ofthe SGP, finaldecisionsontheSGP, whilegiving intaking membercountries supremacy and giving At itscore, thisgives theEuropean ininitiating legislation Commission andinissuingrecommendations primacy in interests andnational interests. sion asanindependent guardian ofthetreaty thedelicate and hasdisturbed EUbalance above described cal rules. Butthe political approach takento SGPrecommendations trust in theEuropean hasundermined Commis- The European Commission already hasanimpossiblydifficulttask to interpret asetof rather incomprehensible fis- the chiefjudgeover fiscaldecisionmaking missioner isinstitutionallyproblematic. theproposal fact, would theprosecutor In amount to to asking preside as Juncker’s planto merge therole ofthechairEurogroup withthat oftheeconomic andfinancialaffairs com- sioner, isbasedonEuropean whoselegitimacy processes, aschairofthegroup ofnational finance ministers would derives isnational andlegitimacy for nationalfrom fiscalpolicy national parliaments.fiscal policy Having a commis- cause itwould give thepositionofchairEurogroup to theEuropean Commission, disregarding that thefact states, andshouldbeappliedeven- handedly. Juncker’s European finance minister proposal isalsoinefficient be Flexibility infiscalrules isusefulbutneeds to bedeployed inabroad from themember forum withstrong support 4 . The European Unionisbuiltonafine balance between community 6 5 . Amerging oftheroles 7 . - www.worldcommercereview.com in its decision making. Beyond ensuring that national fiscal policy Beyondin itsdecisionmaking. thatremains sustainable, ensuring national fiscalpolicy interests community would The proposal would therefore deprive theEurogroup representation oftheimportant ofeuro area-wide interests interest oftheESM. candeliver,good stabilisation policy whilefocussing excessively concerns, onsustainability whichare theprimary lar, itcould takeanexcessively risk-averse approach to thepositive fiscaldeficits, neglecting economic that effects The ESMitself alsohasinterests that might notbeinlinewiththeinterests- oftheeuro area asawhole. particu In of theruleswould belost. least for theeuro area countries). separation between politicalinterpretationThe important andneutral application The proposal would deprive theCommission ofitsrole astheinstitutionincharge ofapplyingthefiscalrules(at doingso,In therole oftheneutral interpreter –ie. theprosecutor –andthejudgewould againbeblurred. nors, itwould essentially have to fullyinternalise thepoliticalprocessrecommendations. whenissuingfiscalpolicy ry, process amongitsBoard itisahighlypoliticalinstitution.As ofGover isbasedonunanimity itsdecision-making particular,In theESMasanintergovernmental institutioncannotmake ‘neutral’ recommendations –onthecontra- because itwould unsettle thedelicate balance between interests oftheeuro area asawholeandnational interests. institution (at leastifthere isnowill to changethetreaties). institutionally theproposal Nevertheless, isworrying ic restructuring, would behighlyproblematic. According to Schäuble, theESMshouldremain anintergovernmental Schäuble’s intergovernmental ofhisproposal, suchasautomat andsomeparts visionalsohasmajorshortcomings, decline. Having saidthis, itistruethat Eurogroup decisionsshouldbemademore transparent. ofthenot provide group andtheefficiency adequate wouldsuffer politicallegitimacy as national ownership would - - www.worldcommercereview.com considered oninflation, andspilloversand itsimpact ofnational policiesacross borders, are relevant channelsthat need to be National fiscalpoliciesmatter for theunionbeyond concerns: inparticular, sustainability thearea-wide fiscalstance sufficiently considered inthecurrent system: focuses ormore onsustainability specificallythe avoidance of excessive are not aspects deficits. But two important the current set-up suffers from drawbacks andshouldtherefore bechanged. Currently, fiscal coordination primarily Neither Juncker’s norSchäuble’s visionswould deliver effective Buttheyare decisionmaking. right to highlight that Towards amore effective institutionalset-up:a ‘Eurosystem policy’ offiscal union. paperbeyond lendingandstrengtheningSchäuble emergency ofbanking isindispensablethat euro areaIt interests shouldbestrongly represented intheEurogroup. That isnotvisibleinthe policy,tions between national fiscalpolicies, inflation monetary andeuro area growth. be littlerepresented. However, itiswell andwell known establishedthat there are numerous spillovers andinterac eration withcentral fiscalpowers is made.driven is Since a by nationalnational policymakers, fiscalpolicy forum Coordination in Europe’s offiscalpolicieswill remain important unionunless a giant leap towards monetary a fed- policies canbediscussedand, ideally, adapted ifnecessary. take care ofstabilisation interms ofthearea-wide policy, fiscalstance. inparticular (2) therepresentation ofcommon interests isweak whilefiscalrulesdonot sufficiently indecision-making treme cases, isweak and (1) The framework for management ofsovereign debt crisis, inex includingpossibledebtrestructurings 9 . In theabsence ofalarge. In central/federal treasury, itisindispensableto have aforum inwhichnational 8 - - www.worldcommercereview.com before themeeting Keydecisionsneedto beprepared ofthetask. plexity through many bilateral discussionsbetween keystakeholders issometimesargued that theEurogroup chairing It isnot afull-timejob, butthisviewseemsto disregard thecom- a permanent, fulltimeposition point to betterAn represent obvious starting euro area interests isto transform thepresident oftheEurogroup into Strengthen therole oftheEurogroup president andimprove itafull-timeposition by making accountability binding politicallyasthefollowing explain. sections can become lessintrusive. At thesametime, to achieve better stabilisation policy, therulesshouldbecome more clausewillbecomecial policiesare more trulyEuropean, credible. theno-bail-out That alsomeansthat fiscalrules Coordination policieswilltherefore for remain stabilisation. important unioniscompletedWhen andfinan - banking the former isbeingbuilt-up. only efficient with European-level stabilisation policy. The latter seemsunlikely tobe available anytime soonwhile However, suchasystem isonlycredible union)and withsignificant banking European-level policies(inparticular is exercised clause preventswhich national fiscalpolicy fullyindependently andahard moral hazard. no-bail-out needs to exist where thesenational politicscanbereconciled. course, Of onecould hopeto create asystem in full-time position is that conflicting interestsfull-time positionisthat conflicting between thenational andthe European mandate would disappear. decisionsdonotonlyrelylective onthenational finance minister advantage inthenational ofa contexts. Afurther to make theEuropean important voice it isvery bodies sothat heard col fact, - inthenational decision-making In and inthenational contexts to explain Eurogroup decisions. example, theEurogroup president could regularly visitnational parliaments and give press conferences inBrussels 11 . Moreover, afull-timepresident shouldalsoincreasingly represent theeuro area’s interests. For 10 . www.worldcommercereview.com tion policies needed for the monetary unionasawhole.tion policiesneededfor themonetary recommendationsfaulty inreal time. Moreover, European fiscalrulesdonot give sufficient weight tothestabilisa- Eurogroup. However, fiscalrulesare inurgent needof reform. They are overly providecomplex, opaqueandoften The Commission shouldcontinue to and beinchargegive offiscalsurveillance neutral recommendations to the The European Commission rules andthefiscal voting weight would require atreaty change. (ECOFIN) course, Of decisionmaking. to merge therole oftheEurogroup president withtheECOFIN chairorto give to give thepresident oftheEurogroup voting weight acertain informal Economic andFinancial Affairs Council step towardsA further increasing the common interest onnational fiscalpolicies would be inthedecisionmaking all, national fiscalpoliciesare notdecidedinthe . with theEurogroup that theultimate to thefact reflect ‘judges’ onnational fiscalpolicies remaininthe council.After er, theEuropean Parliament shouldnothave therightto dismisstheEurogroup president; that rightwould remain European Parliament, back-to-back withtheappearance perhaps oftheEuropean Central Bankpresident. Howev To increase around transparency decisionstaken,theEurogroup president would have to to the regularly report pean Parliament were to play arole intheappointment process. currently officially stillaninformal body according tothe Treaties, wouldneedadifferentformal statusifthe Euro ment (possiblyineuro legalquestionwould area bewhethertheEurogroup, composition). An important whichis voteon aqualifiedmajority inthe Eurogroup followed by a(non-binding) confirmation vote inthe European- Parlia accepted by national ministers, adualappointment process would bedesirable. The appointment could bebased To aneutral underpin president whochairsandrepresents theeuro area interest whilesimultaneouslybeingfully - - www.worldcommercereview.com en. Decisions would thus become increasingly binding on national policymaking by would anintensificationen. Decisions thusbecome increasingly ofpolitical bindingonnational policymaking particular,In itwould betherole ofthepermanent chair to explain inthenational context why adecisionwas tak comply withtherecommendation, politicallypressure would gradually build-up. lar, itwould give arecommendationIf countries donot onthefiscaladjustment memberstates shouldundertake. The Eurogroup, would inturn, - makeapoliticalassessment basedon theneutral Commission numbers. particu In year’sthe next budget. deficitandtheone on howgiven much ofthegapbetween theactual by thesimple shouldbeclosed formula by The Commission would compute thedeficitsuggested by theruleandmakea recommendation to the Eurogroup whenitis at the zero policy lower concerns, bound. monetary bility stabilisation needsandtheneedto support in fiscal recommendations.It would lead to sensible recommendations that takeaccount ofeach country’s sustaina- A simplerulecanbetranslated into asimpleformula andwould leadto greater andeven-handedness transparency isanexpenditureering rule, seefor example Claeys etal(2016). countries shouldrunhigherdeficitsthanwhat the Taylor rulesuggests. An alternative proposal consid- worthwhile need to be agreed andfixed. Finally, to prevent traps whenthenominalinterest liquidity rate isclose to zero, all the debtlevel iscompared to the60percent SGPbenchmark. The weights attached to stabilisation anddebtwould makers: deficitsshouldbehigherastheoutputgapincreases (and conversely).Deficits shouldbe lower, thelarger Instead, a simple ‘Taylor rule’ for deficitsshouldbeputinplace to provide transparent guidance to national policy that makeseconomic andpoliticalsense.sion making isnotachieved.debt reduction Too many loopholesandunclearinterpretations prevent transparent andcleardeci- addition,whilerulessuchastheFiscalIn putsignificant Compact weight intheirapplication ondebt the reduction, - - www.worldcommercereview.com European Safe (ESBies) Bonds tutional convergence, whichtheeuro area willnotbeableto makeat thisstage. More technical solutions suchas in order to besustainable. However, suchastep would require ahugeleapforward interms ofpoliticalandinsti- Without astrong ESM/OMT programme, theeuro area would needto create to issueacommon debt atreasury area safe assetbecauseitsolves theproblem ofself-fulfillingdebtcrises. for theeuro theexistenceimportance area. fact, oftheESM/OMT In programme isanessential substitute for aeuro inallcircumstancesrestructuring inwhichtheESMisemployed would feature destroy thisimportant that isofvital makers. the ECB’s Monetary Outright Transactions programme (OMT) The ESMmanages sovereign andprevents debtcrises insovereign self-fulfillingcrisis debtmarkets together with it institutionallyandhow to embed itintheeuro area governance framework proposed here. forThe theeuro ESMis ofvitalimportance area’s stability. istherefore to It thinkabout how to strengthen important What theESM? about through theappearances oftheEurogroup chairbefore theEuropean Parliament. the simplerule. Transparency aboutwhy deviations from therulewere allowed would besignificantly improved set ofrulesinatransparent way. would befor It theEurogroup asthepoliticaljudgeto decideondeviations from The European Commission would thusbecome alesspoliticalbodythancurrently, andwould interpret asimple vote,ty pressure addingmarket ontop ofpoliticalpressure. pressure onthecountry., access Inextremis to ESMlendingcould bewithdrawn by theEurogroup- by asupermajori 13 may bedesirable butdonotseemto convince orpolicy participants either market 12 . An automatic clausethat forces restructuring debt - www.worldcommercereview.com ex-post gally sounder, would beto accept that out theESMshouldtakelossesfirstincase debtturns to beunsustainable step to maketheESM/OMT Oneimportant programme function. last-resort more credible for themarkets, andle programme isapoliticalagreement to ofdebt, permitting theECBto onthesustainability play fullyitslender-of- Therefore, theESM/OMT programme needsto bemadepermanent. featureThe mostimportant oftheESM/OMT wealth interest payment obligations. Moreover, many potential taxresources remain unexploited, for example taxes on panies, theyhave –even whentheyare ingreat difficulties– revenues (ie. tax resources) that vastly exceed their solved, states cannotgobustunlesstheychooseto withtheECBbeinglenderoflastresort, doso. Unlikecom- issue that intheeuro area involves national andEuropean decisionmakers. Once problem themultipleequilibria is Managing asovereign isaboutmanaging oftheadjustment debtcrisis thedistribution burden –ahighlypolitical ing. with theESMandeuro area ministers. The question iswhat institutional rulesshouldapplyto thedecisionmak al decisionmakersalone, norcanitbetakencentrally. responsibility for Instead thedecisionwillbeandshould be union,thisdecision cannotbetakenby nation- ofthe adjustmentdecide onthedistribution burden. a monetary In The mainpoint here isthat sovereign willalways debtcrises behighlypolitical. The questiontheniswhoshould negative itthereby onthe mainstock spill-overs ofdebt making anundesirable instrument. ever, there questionsasto isliquidandwhetheritwould whethersuchasmallmarket are create alsoimportant provide somedesirable automatic while alsoincreasing adjustment disciplineonthemargin. capacity market How One optionthat could beexplored would bemore instruments suchasGDP-linked equity-like bonds. They could ble, ie. ifraising newtaxes orcuttingspendingwould leadto ahighlynegative situation concerned. for thecountry circumstances ifdebtisassessedto incertain beunsustaina- might benecessary debtrestructuring Nevertheless, 15 14 . . This would beasignificant step ofcreating inthedirection afiscalunion fortheeuro area. - - - www.worldcommercereview.com forward interms ofpoliticalconvergence. istherefore It probably onlyalong-term vision. spending powers to borrow. andthecapacity For theeuro area, thiswould require treaty changes andahugestep small to warrant that title. A finance minister should be incharge ofasubstantial budgetwith,ideally, taxation and idea to callitsvice president the ‘European finance minister’ and give hera‘line’ intheEUbudgetmight be too for supermajority votingfor supermajority (for governments union). andasabackstop to banking They alsosuggest changing itsvoting mechanism allowing French president Emmanuel Macron’s proposal for aEuropean finance minister is, sofar, not concrete What aEuropean about finance minister? charge ofdefiningand overseeing conditionality. taken by the Eurogroup underthepoliticalleadershipofpermanent Eurogroup chair. Finally, itwould bein would have theobligation alternative to describe clearly optionsto theEurogroup, anditwould execute decisions delays infinancialassistance programmes caused by national procrastination could thereby beprevented. The ESM right to initiate discussionsonassistance programmes basedonanindependent analysis ofESMstaff. Unnecessary And while shewould nothave voting rights intheEurogroup, herrole could bestrengthened by giving her the ment. following theappointment by theEurogroup ministers. The managing director would regularly testify to- theparlia particular, theappointment ofthemanaging director oftheESMcould beconfirmed by the European Parliament, inincreasing andstrengthening transparency theEuropeanBut onecould gofurther interest insuchdecisions. In step to increasean important thereliability oftheESMasacrisis-management instrument. Sapir and Schoenmaker (2017) suggest making theESM (2017)suggestmaking andSchoenmaker Sapir 17 –awiseproposal. voting Moving (eg. to supermajority an85percent threshold) would be 16 apermanent institutionincharge management ofcrisis 18 . Juncker’s www.worldcommercereview.com country concerned country if itwas strongly affectedcountry shock.by anasymmetric could amount to 1-2percent The support ofGDPthe For example, afundamounting to €50-70billionwouldto beprovided enablesignificant support to aspecific faced withashock. oftheseven-yearoption would beto usepart EUbudgetframework asafundthat could bedeployed incountries would notreplace national stabilisation countries policies, withrelatively itwould support littlefiscalspace. One A reform oftheEUbudgetwould thecreation alsopermit ofastabilisation instrument. While suchaninstrument one wants to trulytakecare ofEuropean publicgoods. could free upsignificantricultural policy resources, butsomeincreases the more in contributions may benecessary national level itcanprovide. faces strong budgetlimitations onthesupport Areform oftheEuropean common ag- convergence, fundsshouldcontinueStructural to support inregions insignificant butinparticular needwhenthe and security. increasingly fund European-level research, joint universities, exchange programmes andcollaboration indefence vestments inclimate changemitigation could beincreasingly financed by theEUbudget. The EUbudget could also which would ofmany also have citizens inEurope. thesupport particular, In thecosts ofborder control andjoint in- President Macron’s speechidentifies withtrue goodpriorities Europeanfor joint Sorbonne action value-added, euro area area andnon-euro countries the EUbudgetissensible. First, itwould avoid creating newinstitutionsthat would drive apoliticalwedge between makessenseto developIt theEUbudgetfurther. The Commission’s ideato create of theeuro area budgetaspart to 15percent of theEUbudget, would beahelpful instrument. However, itshouldbeclearthat suchafundwould 20 . As recessions happenonaverage seven years, every suchaprovision, amounting to about10 19 . Second, reform serious oftheEUbudgetisinany caseneeded. www.worldcommercereview.com towards a truecentralisation fundedwithown resources ofstabilisation policy andcombined witha borrowing could alsoconsider tax,whichcould acarbon beraised already underthecurrent EUtreaties. This would bea step on arather volatile tax,suchasacorporate tax,then theEUbudgetitselfwould become astabilisingfactor. One to fundtheEUbudgetandcreate aborrowing intheEUbudget. For capacity example, ifonebasedtheEUbudget towardsOne significant step further creating EU-level meaningful fiscalcapacity wouldbe to introduce anEUtax more inspecific countries whentheyare hit by shocks, suchasanincrease inimmigration European publicgoods. Onecould, for example, create more contingent budgetlinesthat would allow spending Politically, itmight therefore beeasier notto differentiate between andspending afund for for stabilisation policy that makestheintroduction ofinsurance intheeuro union,itisthisasymmetry area sodifficult. tary engaging insensiblemacroeconomic stabilisation policy. As desirable asinsurance isforofamone thefunctioning and insure themselves thanweaker inthemarkets countries that are more access atoflosingmarket risk whilestill Such insurance for ismore weaker important thanfor stronger countries. Strong countries are more ableto borrow such asalarge fallinGDP. linked to clear conditions reform. interms ofstructural Athird optionwould beto linkitto trigger, anobjective support are thosethat havesupport failedto reform theirlabourmarkets based onaclearindicator. However, itraises politicalconcerns serious that thecountries that would mostneed creating acatastrophic unemployment reinsurance schemehastheadvantage ofenablingautomatic payments payments to definethe wouldwould bemade.conditions underwhichsuchsupport beimportant It The ideaof countries hitby severe shocks. not play asignificant role inarea-wide macroeconomic stabilisation policy.It specific would beinsurance to support 21 . An alternative would beto have aninstrument 22 . - www.worldcommercereview.com tem of fiscal policy and intheeuroremain tem at the offiscalpolicy centre decision-making area. ofjoint fiscalpolicy The proposal set-up andgovernanceInstitutional matter. thisproposal, In the Eurogroup would betransformed into aEurosys- sources. merged, especiallyiftheESMbecameafullEUinstitutionand theresources oftheESMbecametrueEuropean re member ofthegroup. thelongterm, thepositionsofbudgetcommissioner andESMmanaging In director could be euro area were to decideto create additionalfiscalcapacities, theEUbudget commissioner would beanadditional addition,theESMmanaging director wouldIn begiven theright to initiate discussionsonESM programmes. the If right ofinitiative andtheobligation to makerecommendations onfiscalpolicy. withoutvotingthe ESMmanaging directors would rights. beparticipants As today, theCommission would have the a national minster andideallywould have voting rights. The Commissioner for economic andfinancial affairsand would alsobethevoice representing theeuro area interests innational andinternational forums. Shewould notbe modifications to strengthen theeuro area-wide interest. At the top Eurogroupwould beapowerful chair, who This institutional set-up could becalleda ‘Eurosystem offiscalpolicy’ is why shewould notbeaeuro area finance minister. inthe Eurogroup.Yet, sheshouldparticipate also nothave thepower to overrule national decisions, apoliticalpower that would remain withtheEurogroup. This ing. National fiscalpolicieswill remain the core offiscalpoliciesintheeuro area. Thebudget commissioner would above national ministers inthat shewould nothave theresources to replace national borrowing ornational spend- insurancemeaningful that would behelpfulinspecificcircumstances. This budget commissioner would notstand The EUbudgetcommissioner resources managesmeaningful andareorientation oftheEUbudgetcould provide legally andinstitutionallydifficult to do. capacity. Sucha ‘federalisation’ would improve ofstabilisation policy oftheeuro area theworking butitispolitically, 23 . It would beaEurogroup. It withsignificant - www.worldcommercereview.com Guntram WolffDirector ofBruegel isthe decides to become afederation. ■ will remain adelicate whichisunavoidable political balancingact, unless fiscalpolicymaking EuropeNevertheless, stabilisation. providing publicgoodsand supporting focussing butalsoarea-wide notonlyon sustainability stabilisation. The EUbudgetwould become more usefulfor and European interests are negotiated andcoordinated. Reformed fiscalrules would provide transparent guidance The Eurosystem would thusbethe centre offiscalpolicy between of national coordination where difficult trade-offs tions, newrights ofinitiative (andpossiblyvotes) andgreater accountability to theEuropean Parliament. manage thesetensions andstrengthen inthedebate thevoice ofthecentre withthecreation ofpermanentposi- These are inherent to thedecentralised organisation offiscalpoliciesintheeuro area. Yet, theproposal would help ing. here outlinedwould notremove thetensions between national andeuro area wideinterests infiscaldecisionmak - www.worldcommercereview.com 10. For the last months of his mandate, Jeroen Dijselbloom has become such a full-time Eurogroup chair. Eurogroup full-time a such become has Dijselbloom Jeroen mandate, his of months last the For 10. 9. For a recent paper see Farhi and Werning (2017). Werning and Farhi see paper recent a For 9. . markets capital 8. The paper does not discuss the completion of banking union, which is essential for a stable euro area, nor next steps on on steps next nor area, euro stable a for essential is which union, banking of completion the discuss not does paper The 8. interpret the SGP rules differently for different countries? different for differently rules SGP the interpret cation of the SGP. How can the Commission ask member states to respect the rule of law when it itself appears ready to to ready appears itself it when law of rule the respect to states member ask Commission the can How SGP. the of cation - appli the beyond well effects negative have can This states. member larger and smaller between approach even-handed 7. Representatives of smaller countries have voiced concerns that they cannot rely on the Commission to take an an take to Commission the on rely cannot they that concerns voiced have countries smaller of Representatives 7. framework and decisions that need to be taken in the council based on such recommendations. such on based council the in taken be to need that decisions and framework Policy does not foresee a clear institutional separation between the issuing of recommendations based on a clear legal legal clear a on based recommendations of issuing the between separation institutional clear a foresee not does Policy a commissioner acquires the chairmanship of the Eurogroup. Also substantively, the EU’s Common Foreign and Security Security and Foreign Common EU’s the substantively, Also Eurogroup. the of chairmanship the acquires commissioner a European Commission, but the high representative position is in fact a double-hat position and not a role in which only only which in role a not and position double-hat a fact in is position representative high the but Commission, European 6. Some have made a comparison with the high representative for foreign affairs, who is also the vice president of the the of president vice the also is who affairs, foreign for representative high the with comparison a made have Some 6. (minutes 26ff; Amato, 2017). Amato, 26ff; (minutes https://www.eu2017.ee/political-meetings/academic-conference 5. As was aptly described by ’s former prime minister Giuliano Amato at an October 2017 conference; see see conference; 2017 October an at Amato Giuliano minister prime former Italy’s by described aptly was As 5. tion. - posi minister finance his keeping while Bundestag the of president Schäuble Wolfgang appointing to comparable is It 4. rently subject to the SGP. the to subject rently 3. Though the Schäuble paper is silent on what this would mean for countries outside the euro area, which are also cur also are which area, euro the outside countries for mean would this what on silent is paper Schäuble the Though 3. https://www.scribd.com/document/361120275/German-finance-ministry-non-paper-on--reforms 2. In an undated non-paper from the German federal finance ministry, published in October 2017; see see 2017; October in published ministry, finance federal German the from non-paper undated an In 2. http://europa.eu/rapid/press-release_SPEECH-17-3165_en.htm 1. Juncker outlined his vision in his 13 September 2017 State of the Union address to the European Parliament. See See Parliament. European the to address Union the of State 2017 September 13 his in vision his outlined Juncker 1. Endnotes - www.worldcommercereview.com 23. See Sapir and Wolff (2015) for an earlier discussion with a somewhat different set-up. different somewhat a with discussion earlier an for (2015) Wolff and Sapir See 23. which one could arrange payments to countries and regions in need. in regions and countries to payments arrange could one which 22. The more the budget lines of the EU budget become contingent, the more flexibility and the greater the budget with with budget the greater the and flexibility more the contingent, become budget EU the of lines budget the more The 22. scheme for large shocks would have required net payments of some €50 billion in 2009, when the shock was greatest. was shock the when 2009, in billion €50 some of payments net required have would shocks large for scheme 21. In a simulation exercise, Claeys et al (2017), show that a system built around a European unemployment insurance insurance unemployment European a around built system a that show (2017), al et Claeys exercise, simulation a In 21. 20. For example, it could amount to €32 billion over two years for a country the size of Italy. of size the country a for years two over billion €32 to amount could it example, For 20. 19. Still, non-euro area countries should not be liable to pay into the euro area budget line of the EU budget. EU the of line budget area euro the into pay to liable be not should countries area non-euro Still, 19. 18. See, for example Macron’s speech at the Sorbonne on 26 September 2017 (Macron, 2017). (Macron, 2017 September 26 on Sorbonne the at speech Macron’s example for See, 18. this would violate German constitutional requirements, see Calliess (2012). Calliess see requirements, constitutional German violate would this 17. The German constitutional court, however, does not allow a super majority vote where could be outvoted as as outvoted be could Germany where vote majority super a allow not does however, court, constitutional German The 17. the ESM are due. are ESM the could be Article 352 of the Treaty on the Functioning of the EU. At the time of writing, European Commission proposals on on proposals Commission European writing, of time the At EU. the of Functioning the on Treaty the of 352 Article be could nent institution and to expand its functions so it can serve as a back-stop to banking union. One possible legal avenue avenue legal possible One union. banking to back-stop a as serve can it so functions its expand to and institution nent - perma a it make to is important Most importance. secondary of is EMF the institution the rename to not or Whether 16. surged. European societies in a context in which public debt has often increased substantially while private wealth has equally equally has wealth private while substantially increased often has debt public which in context a in societies European 15. Aussilloux et al (2017) usefully remind us that many tax resources such as property taxation remain unexploited in in unexploited remain taxation property as such resources tax many that us remind usefully (2017) al et Aussilloux 15. 14. For a detailed discussion, see Wolff (2014). Wolff see discussion, detailed a For 14. eign bond markets. bond eign 13. The main justification for the ESBies in Brunnermeier et al (2016) is exactly the problem of multiple equilibria in sover in equilibria multiple of problem the exactly is (2016) al et Brunnermeier in ESBies the for justification main The 13. liquidity problems without any need to resort to conditionality. to resort to need any without problems liquidity 12. Claeys (2017) emphasises that the reformed ESM should also have mechanisms to deal with pure multiple equilibria/ multiple pure with deal to mechanisms have also should ESM reformed the that emphasises (2017) Claeys 12. that more preparatory work is done by the current Eurogroup president. Eurogroup current the by done is work preparatory more that 11. 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