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Deepening EMU: Commission makes limited steps (mostly) forward

December 6, 2017 by andrew36 Leave a Comment

Today the EU Commission launched a long-awaited set of concrete proposals to deepen European Monetary Union (EMU). The proposals are voluminous and in some areas detailed. Here’s a summary of the most important points and a first evaluation.

First, the European Stability Mechanism, currently intergovernmental, is to be transformed into a European Monetary Fund as a fully-fledged EU institution. Beyond the legal change – which is surely welcome, the intergovernmental solution having been chosen under the pressure of imminent crisis – the Commission envisages few functional changes. The main task of crisis-lending to Member States in need and the related ability to issue bonds to raise finance remain. New is that the EMF is to back-stop the Single Resolution Fund as part of the Banking Union. By providing guarantees or a credit line, and in parallel by reducing the policy areas subject to unanimity, the EMF will be able to offer swift assistance in the case of banking crises, plugging a notable hole in the policy framework. By underpinning confidence in financial stability, this should reduce the likelihood of its having to be used.

Reference is made to the possibility for the EMF develop new financial instruments “over time”. This is a door left open to a future extension of borrowing – and thus stabilization – capacity in the future.

Equally important, unlike in the vision of now-departed German finance minister Wolfgang Schäuble, the EMF is not foreseen to play a key role in disciplining member states and ensuring the implementation of structural reforms. Oversight responsibility is to remain unchanged (i.e. divided between the Commission and the Council). [Read more…]

Filed Under: Analysis Tagged With: Coordination and Governance, deepening EMU, EMU, Eurogroup, European Commission, European Monetary FUnd, independent Annual Growth Survey, Jean-Claude Juncker, Macron, Schäuble, stabilisation, Treaty on Stability

Juncker talks the talk: who will walk the walk?

September 14, 2017 by andrew36 Leave a Comment

Jean-Claude Juncker’s 2017 State of the European Union (SOTEU) speech was marked, particularly compared with last year’s offering, by a renewed sense of optimism, but also by the urgency of serious institutional reform.

The Commission President covered a wide range of issues and challenges. The overall thrust of his message is that the EU now has the wind in its sails and must seize the opportunity to push ahead, taking further steps to underpin the integration process. That the wind has changed tack is evidenced by the defeat, for now at least, of the populist surge, the slo-mo train-wreck that is Brexit – which has revealed much anti-European rhetoric as simple untruths, and brought home the advantages of close economic integration – and not least the steadily improving economic situation, which has now broadened to many countries badly mauled by the crisis. Unemployment, as Juncker noted, is at a 9-year low.

Perhaps aware of the criticism that the EU is seen as too technocratic and fails to inspire emotions, the Commission President did emotion with a capital E, intertwining personal reminiscences with appeals to values including equality, freedom, the rule of law and transparency.

But it was not just mood music. [Read more…]

Filed Under: Analysis Tagged With: Brexit, EU Commission, euro, Jean-Claude Juncker, SOTEU, State of the European Union

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  • iAGS - independent Annual Growth Survey
  • FMM - Research Network Macroeconomics and Macroeconomic Policy
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Recommended links

  1. Mainly macro (Simon Wren-Lewis)
  2. Paul Krugman
  3. econoblog101 (Dirk Ehnts)