Fidest – Agenzia giornalistica/press agency

Quotidiano di informazione – Anno 32 n° 338

Reboot euro: lessons learned from European Economic Governance

Posted by fidest press agency su lunedì, 13 giugno 2016

Lieven TACKFor roughly half of its existence, the euro has been struggling to overcome the most serious financial and economic crisis since the establishment of the European Community in the 1950s. In particular, unemployment in the eurozone rose rapidly from 7.6 percent at the start of the crisis in 2008 to a record high of 12 percent in 2013. In addition, public debt grew from 70 percent of gross domestic product (GDP) in 2008 to 94 percent last year. These record numbers will remain in our memory for a long time to come.
The response of the European Union and the eurozone to the crisis has focused on three areas: In response to the drying-up of the financial markets after the toxic bubble of unbridled securitisation burst, monetary easing flooded markets with excessive amounts of cheap credit. Hopeless as ever, the European Central Bank (ECB) reached deep into its toolbox and launched impressive asset buying operations (Securities Market Programme, Outright Monetary Transactions and Targeted Long-Term Refinancing Operations).Simultaneously, ECB president Draghi drastically lowered interest rates, soon followed by commercial rates tumbling to practically zero percent. Several spending programmes were launched within a relaxed state aid regime, largely aimed at the recapitalisation of the banking system. Southern European Member States in distress were sustained on a drip thanks to a brand new Treaty-based permanent rescue fund worth 700 billion euro (the European Stability Mechanism). Another European fund, totalling 315 billion euro, was set up for investments in infrastructure, research, innovation and the business sector (the European Fund for Strategic Investments).
An ambitious package of structural reforms in labour and product markets was agreed upon (Europe 2020). In addition to this long-term growth strategy, rigorously enforced rules for maintaining public deficits and debts (the Sixpack and the Twopack)[5],[6] and economic imbalances (the Macroeconomic Imbalance Procedure) below specific limits are part of the EU’s ‘new economic governance’. This new surveillance system for budgetary and economic policies focuses on anti-cyclical government finances and is coordinated and monitored in the context of the ‘European Semester’.The whole set of anti-crisis measures will pave the way for the achievement of a deep and genuine Economic and Monetary Union (EMU) by 2025. The roadmap for this fully fledged EMU includes two stages. The first step aims to create an economic union, a fiscal union and a financial union (including the Banking Union).It will be followed by a Commission White Paper in Spring 2017 that will put forward proposals for a more binding convergence process and a euro-area treasury.
In conclusion, the future of our common currency strongly depends on the willingness of our politicians to implement the reform agenda of a politically and economically divided continent. This is only realistic insofar as EU leaders show unity and courage to press the reboot button ‘Ctrl-Alt-Del’: Ctrl = control the current crisis and protect us against inevitable future shocks; Alt = focus on change and step up structural reforms; Del = get rid of imbalances and bridge socio-economic divergences. The euro is staring into an abyss and concerted and decisive action is urgently needed to pull it back! (photo: Lieven TACK)

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