Lecture eu economy in the context of the world crisis

EU economy in the context of the world crisis

Neven Borak

Points departure

• Collective loss of memory.• Cyclicallity of time.• Negative vs. positive integration.

Haulage

French train

Illyrian rovinces

German train

Holly Roman Empire.Holly Aliance.Balance of powers.WWI.WWII.Cold War Vzhod-Zahod

Yugoslavia – mini union?Foundations, identity, debts.

Fall of iron curtain Mitteleuropa , EU, EMU

Mitteleuropa

United States of Europe

Richard Coudenhove-Kalergi:Pan-Europa (1923)

"Europe as a political concept does not exist. This part of the world includes nations and states installed in the chaos, in a barrel of gunpowder of international conflicts, in a field of future conflicts. This is the European Question: the mutual hate of the Europeans that poisons the atmosphere. (....) The European Question will only be solved by means of the union of  Europe's nations. (...) The biggest obstacle to the accomplishment of the United States of Europe is the one thousand years old rivalry between the two most populated nations of Pan-Europe: Germany and France..."

Aristide Briand League of nations (1929)

"I believe that a sort of federal bond should exist between the nations geographically gathered as Europe countries; these nations should, at any moment, have the possibility of establishing contact, of discussing their interests, of adopting common resolutions, of creating amongst themselves a bond of solidarity that allows them, on suitable occasions, to face up to serious circumstances, in case they arise. (...) Evidently, the association will take place mainly in the economic domain: this is the most pressing question..."

United States of Europe

Union FederationConfederation

Christian USESoviet USE

USE with German leadership

CompetencesTreaty on the Functioning of the European Union.

Exclusive

(a) customs union; (b) the establishing of the

competition rules necessary for the functioning of the internal market;

(c) monetary policy for the Member States whose currency is the euro;

(d) the conservation of marine biological resources under the common fisheries policy;

(e) common commercial policy

Shared(a) internal market; (b) social policy, for the aspects defined

in this Treaty; (c) economic, social and territorial

cohesion; (d) agriculture and fisheries, excluding

the conservation of marine biological resources;

(e) environment; (f) consumer protection; (g) transport; (h) trans-European networks; (i) energy;(j) area of freedom, security and justice; (k) common safety concerns in public

health matters, for the aspects defined in this Treaty

Coordination

- The Member States shall coordinate their economic policies within the Union. To this end, the Council shall adopt measures, in particular broad guidelines for these policies.

Specific provisions shall apply to those Member States whose currency is the euro.

- The Union shall take measures to ensure coordination of the employment policies of the Member States, in particular by defining guidelines for these policies.

- The Union may take initiatives to ensure coordination of Member States’ social policies.

- The Union shall have competence to carry out actions to support, coordinate or supplement the actions of the Member States. The areas of such action shall, at European level, be:

(a) protection and improvement of human health; (b) industry; (c) culture; (d) tourism; (e) education, vocational training, youth and sport;(f) civil protection; (g) administrative cooperation.

Economic and monetary policy I

1. For the purposes set out in Article 3 of the Treaty on European Union, the activities of the Member States and the Union shall include, as provided in the Treaties, the adoption of an economic policy which is based on the close coordination of Member States’ economic policies, on the internal market and on the definition of common objectives, and conducted in accordance with the principle of an open market economy with free competition.

2. Concurrently with the foregoing, and as provided in the Treaties and in accordance with the procedures set out therein, these activities shall include a single currency, the euro, and the definition and conduct of a single monetary policy and exchange-rate policy the primary objective of both of which shall be to maintain price stability and, without prejudice to this objective, to support the general economic policies in the Union, in accordance with the principle of an open market economy with free competition.

3. These activities of the Member States and the Union shall entail compliance with the following guiding principles: stable prices, sound public finances and monetary conditions and a sustainable balance of payments.

Economic and monetary policy II

1. Member States shall conduct their economic policies with a view to contributing to the achievement of the objectives of the Union, as defined in Article 3 of the Treaty on European Union, and in the context of the broad guidelines.

2. 2. The Council shall, on a recommendation from the Commission, formulate a draft for the broad guidelines of the economic policies of the Member States and of the Union, and shall report its findings to the European Council. The European Council shall, acting on the basis of the report from the Council, discuss a conclusion on the broad guidelines of the economic policies of the Member States and of the Union.

On the basis of this conclusion, the Council shall adopt a recommendation setting out

these broad guidelines. The Council shall inform the European Parliament of its

recommendation. 3. In order to ensure closer coordination of economic policies and sustained

convergence of the economic performances of the Member States, the Council shall, on the basis of reports submitted by the Commission, monitor economic developments in each of the Member States and in the Union as well as the consistency of economic policies with the broad guidelines referred to in paragraph 2, and regularly carry out an overall assessment.

4. For the purpose of this multilateral surveillance, Member States shall forward information to the Commission about important measures taken by them in the field of their economic policy and such other information as they deem necessary.

Monetary policy

Overdraft facilities or any other type of credit facility with the European Central Bank or

with the central banks of the Member States (hereinafter referred to as ‘national central

banks’) in favour of Union institutions, bodies, offices or agencies, central governments,

regional, local or other public authorities, other bodies governed by public law, or public

undertakings of Member States shall be prohibited, as shall the purchase directly

from them by the European Central Bank or national central banks of debt instruments.

The primary objective of the European System of Central Banks (hereinafter referred to

as ‘the ESCB’) shall be to maintain price stability. Without prejudice to the objective of

price stability, the ESCB shall support the general economic policies in the Union with a

view to contributing to the achievement of the objectives of the Union as laid down in

Article 3 of the Treaty on European Union. The ESCB shall act in accordance with the

principle of an open market economy with free competition, favouring an efficient

allocation of resources, and in compliance with the principles set out in Article 119.

No-bail clause

The Union shall not be liable for or assume the commitments of central governments,

regional, local or other public authorities, other bodies governed by public law, or public

undertakings of any Member State, without prejudice to mutual financial guarantees for

the joint execution of a specific project. A Member State shall not be liable for or assume

the commitments of central governments, regional, local or other public authorities, other

bodies governed by public law, or public undertakings of another Member State, without

prejudice to mutual financial guarantees for the joint execution of a specific project.

Fiscal policies1. Member States shall avoid excessive government deficits.

2. The Commission shall monitor the development of the budgetary situation and of the stock of government debt in the Member States with a view to identifying gross errors. In particular it shall examine compliance with budgetary discipline on the basis of the following two criteria: (a) whether the ratio of the planned or actual government deficit to gross

domestic product exceeds a reference value, unless: — either the ratio has declined substantially and continuously and reached a level that comes close to the reference value, — or, alternatively, the excess over the reference value is only exceptional and temporary and the ratio remains close to the reference value; (b) whether the ratio of government debt to gross domestic product exceeds a reference value, unless the ratio is sufficiently diminishing and approaching the reference value at a satisfactory pace.

3. If a Member State does not fulfil the requirements under one or both of these criteria, the Commission shall prepare a report. The report of the Commission shall also take into account whether the government deficit exceeds government investment expenditure and take into account all other relevant factors, including the medium-term economic and budgetary position of the Member State.

Unfinished project

Single monetary policy, several fiscal policies.

(FRG: Stability and growth law 1967)Stability and Growth Pact 1997 (I)Stability and Growth Pact 2005 (II)Stability and Growth Pact 2011 (III, six-pack)Fiscal compact 2012Stability and Growth Pact 2013 (IV, two-pack)

A Guide to SGP's reforms over the years

Single monetary policy, several fiscal policies.

(FRG: Stability and growth law 1967)Stability and Growth Pact 1997 (I)Stability and Growth Pact 2005 (II)Stability and Growth Pact 2011 (III, six-pack)Fiscal compact 2012Stability and Growth Pact 2013 (IV, two-pack)

Stability and Growth Pact 1997 (I)

Stability and Growth Pact 2005 (II)

Stability and Growth Pact 2011 (III)

The European semester

Stability and Growth Pact 2013 (IV)

Rule of man or rule of law or rule of equations?

Rule of man or rule of law or rule of equations?

Rule of man or rule of law or rule of equations?

Rule of man or rule of law or rule of equations?

Intermediate solutions

Monetary union, fiscal union, banking union, ? union

European Systemic Risk Board (to identify and monitor systemic risk, and to issue policy recommendations to mitigate such risks)

European Stability Mechanism (a permanent crisis resolution mechanism)

European Financial Stability Facility

Speculations on final solution

More exclusive and less shared competences.

From single monetary policy and several fiscal policies

to

single monetary policy and single fiscal policy.

Monetary union + fiscal federalism

Monetary union, fiscal union, banking union, ? union

More exclusive and less shared competences.