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Could uncertainty derail the European recovery?

It is a contradictory time for Europe. The economy is recovering but the political climate is uncertain. There is excitement about common projects but

Speakers

Zsolt Darvas

Macroeconomics, Central Banking and Time Series Analysis

Senior fellow

Maria Demertzis

Macroeconomics, Monetary and Financial Stability, Political Economy

Interim Director

Franco Bruni

Vice President, ISPI; Lead Co-Chair, T20 Italy TF9 on International Finance,

Marietje Schaake

International policy director of the Cyber Policy Center, Stanford University

VIDEO & AUDIO RECORDINGS

Zsolt Darvas, Bruegel’s Senior Fellow, opened the event by naming several challenges the EU faces currently among those being Brexit, the uncertainty following the Italian elections, and the still very high unemployment in many European countries.  External shocks, such as the protectionist US trade policy, add to this uncertainty.

Franco Bruni, Vice President of ISPI and contributor to the ISPI Annual Report 2018, provided further details on the uncertainty surrounding the European Union in his presentation. He mentioned several EU specific problems such as the late formation of a German government, disagreements in the Franco-German leadership and uncertain formation of the Italian government. On top of these “home-made” problems, Mr. Bruni outlined global challenges the EU has to deal with. As an overall assessment, Bruni identified a strong economic situation in the EU that is accompanied by a fragile political situation and is wondering whether the European political elites are waiting for the next big crisis to tackle the current problems.

Maria Demertzis, Bruegel’s Deputy Director, identified a lack of trust as the fundamental source of uncertainty. Currently, European countries do not have sufficient trust to each other. On top, trust in the European institutions and projects is declining as well. Ms. Demertzis argues that diverging levels of rule of law in European countries is the source of the declining trust. EU’s promise to new member states of an increasing quality in the rule of law could not be held and therefore the EU should think of implementing a system that monitors the status of rule of law. Regarding the global challenges, the EU should increase the resilience of the Europa economic and political system. That would include aiming for a good Brexit outcome, defending the multilateral system, and introducing an “insurance” system that protects the EU from external (economic) shocks.

Marietje Schaake, Member of the European Parliament, expressed her deep concern about the fast and increasing deteriorating of the transatlantic relations. She pointed out that nobody would have imagined a decline in that pace and that this trend will have profound consequences for Europe. In order to improve trust in Europe’s institutions and to reduce uncertainty, Ms. Schaake proposed that the European institutions should rigorously focus on a set of issues (such as immigration, security, climate) in which the EU can bring added value. On top, she promoted a “rules-based approach” in the field of rule of law in which breaking the rule has to hurt and has consequences. She regards the payment of cohesion funds, conditional of the quality of rule of law, as a radical policy option but which is worth discussing.

 

Event notes by Alexander Roth.

The event offered the occasion to present and discuss the ISPI 2018 Annual Report “Big Powers are back. What about Europe?"

event materials

Presentation by Franco Bruni