Past Event

The Euro and the battle of ideas

Why is the Euro in trouble? Are philosophical differences between the founding countries to blame and can those differences be reconciled?

Date: October 13, 2016, 8:30 am Topic: European Macroeconomics & Governance

SUMMARY

See below for the video and audio and the event materials 

At this event Markus Brunnermeier and Harold James presented their new book The Euro and the Battle for Ideas (co-authored with Jean-Pierre Landau). A joint work which combined not only their different backgrounds (the authors are, respectively, an economist, a historian and a former deputy governor of the Banque de France), but also their different national perspectives.

The authors outlined how the political response to the euro crisis has led to a seismic shift of power in Europe. With the notable expection of the ECB which gained significantly in stature and influence, decision-making capacity moved from European institutions to the capitals of member states, particularly Berlin and Paris. However, the differences between Northern (but above all German) and what are sometimes called Southern (but above all French) visions of the appropriate economic policy emerged with great clarity in the management of the crisis.

In this regards, the authors contested the usual way of interpreting the political dynamics as simple result of a balancing between contrasting economic interests. Conversely, since material interests are always interpreted through the lens of ideas, they claimed that we should take into account more the different economic philosophies developed in each country to fully understand the origin and the rationale of any European political dispute.

The declared attempt of the book is to trace the long-term historical, intellectual, and cultural origins of the “French” and “German” economic traditions. The authors claimed that the indeterminate cohabitation of these two traditions of economic and political thought, in addition to mutual incomprehension and national stereotyping, prevented an adequate response during the crisis and led to downward compromises on the future design of the European Union.

In terms of policy contribution, the authors supported the proposal presented in 2011 to create Euro Safe Bonds (“ESBies”), as a practical solution to permanently break the link between sovereign debt and the stability of banking sector in a manner amenable to different political (and philosophical) positions.

According to the main discussant, Marco Buti, the book provides important insights with respect to the origin and the persistence of clashing economic cultures within European project. He agreed with the opinion expressed by the authors regarding the shift towards intergovernamentalism, reclaiming, nevertheless, an active role of the European Commission during the crisis, bringing the EFSM and the Banking Union as example of important policy proposals.

He added to the discussion evidence that economic differences across EA countries widened during the first years of EMU and linked them to the increasingly diverging social and political preferences. To bridge these differences and address the transition to an enchanced European governance, he called for the parallel progress on risk sharing and risk reduction in the current phase of development of Banking and Capital Markets Union. A relevant obstacle, however, is represented by the fact that these over-present differences of economic ideas increased substantially during the crisis. After several year of digging trenches around established intellectual and theoretical propositions, Marco Buti warned that economics ideas tranformed even into ideologies, from which an open discussion in the quest for a compromise becomes more difficult. Finally, he showed interest for the proposal of the ESBies, as a good balance between the non-mutualisation concerns (German position) and the (French) necessity to address systemic risks, but it would require a nontrivial transition in the current sovereign bonds market.

A relevant comment from the audience came from Mario Monti, according to who the reciprocal interaction between European political authorities and the ECB have been somewhat underestimated by the authors (at least in their presentation). As an example of this, he recalled the importance of the decisions taken during the Euro Area Summit in 29 June 2012, which thereafter represented the political pre-conditions for Mario Draghi’s “whatever it takes” speech. Moreover, the discussions during that Summit represented another suggestive example of the battle of ideas evoked by the authors. In that context, indeed, the German position emphasizing the need to put one’s house in order first (“often falling into the fallacy of composition”) severely confronted in the quest of compromise (truly necessary at that time) with the French and others’ ones pointing more to systemic problems requiring systemic responsabilities.

In conclusion Guntram Wolff made two points. Firstly, he questioned the “shift towards intergovernmentalism” argument identified by the authors since it provided a wrong description of the events: in fact there was nothing to be shifted. What actually occurred and eventually added political tension during the crisis was the difficult creation of new mechanisms for fiscal risk-sharing across countries, which was not originally included in the Maastricht treaty. Secondly, regarding financial stability issues, he agreed on the necessity to complete the Banking Union, while arguing that the real missing part is a proper fiscal backstop, and not necessarily the ESBies.

Event notes by Filippo Biondi, Research Assistant.

AUDIO & VIDEO RECORDING


event materials

Presentation by Markus Brunnermeier and Harold James

Presentation by Marco Buti

Schedule

Oct 13, 2016

8.30-9.00

Check-in and breakfast

9.00-9.30

Presentation

Markus K. Brunnermeier, Professor, Princeton University

Harold James, Professor, Princeton University

9.30-9.45

Comments

Marco Buti, Head of Cabinet, Commissioner Paolo Gentiloni

9.45-10.30

Audience Q&A

Chair: Maria Demertzis, Deputy Director

10.30

End

Speakers

Markus K. Brunnermeier

Professor, Princeton University

Marco Buti

Head of Cabinet, Commissioner Paolo Gentiloni

Maria Demertzis

Deputy Director

Harold James

Professor, Princeton University

Location & Contact

Bruegel, Rue de la Charité 33, 1210 Brussels

Matilda Sevon

[email protected]

Read about event More on this topic
 

Past Event

Past Event

Investment firepower for the recovery: a conversation with Philippe Donnet, CEO of Assicurazioni Generali

At this event the CEO of Assicurazioni Generali, Philippe Donnet will be in conversation with Guntram Wolff, Director of Bruegel.

Speakers: Philippe Donnet and Guntram B. Wolff Topic: European Macroeconomics & Governance Date: July 8, 2021
Read about event More on this topic
 

Past Event

Past Event

Strengthening the weak links: future of supply chains

What new supply chains trends will we see in the post-pandemic era?

Speakers: Ebru Özdemir, André Sapir and Guntram B. Wolff Topic: Global Economics & Governance Date: July 7, 2021
Read about event
 

Past Event

Past Event

Ensuring competitiveness of low-carbon investments

At this event, speakers will introduce the core idea of commercialisation contracts, and then discuss key design elements. This includes whether contracts should be issued at the EU or national level, how competition for contracts should be organised, and which industries should be eligible for support.

Speakers: Natalia Fabra, Peter Handley, Ben McWilliams and Georg Zachmann Topic: Energy & Climate, European Macroeconomics & Governance Date: July 1, 2021
Read about event More on this topic
 

Past Event

Past Event

EU debt vs national debts: friends or foes?

The EU will become into a major issuer of safe assets in the coming years. How will this interact with the debt issuance of European sovereign debts?

Speakers: Grégory Claeys, Yves Jacob, Gert-Jan Koopman, Pablo de Ramón-Laca and Imène Rahmouni-Rousseau Topic: European Macroeconomics & Governance Date: June 29, 2021
Read about event More on this topic
 

Past Event

Past Event

How to spend it? A closer look at the recovery plans

In this event, participants will take a closer look at the recovery plans submitted by EU countries.

Speakers: Zsolt Darvas, Alex Patelis and Maarten Verwey Topic: European Macroeconomics & Governance Date: June 23, 2021
Read about event More on this topic
 

Past Event

Past Event

Conference on the Future of Europe: Vehicle for reform versus forum for reflection?

At this policy dialogue organised by the research project EU3D, panellists will discuss different options and what they may entail while revisiting the debates on the future of Europe at national and EU-level that have been conducted thus far and their patterns, including preliminary findings on national parliamentary debates.

Speakers: Sergio Fabbrini, John Erik Fossum, Magdalena Góra, Vivien Schmidt, Manfred Weber and Guntram B. Wolff Topic: European Macroeconomics & Governance Date: June 16, 2021
Read about event More on this topic
 

Past Event

Past Event

The Recovery and Resilience Fund: Accelerating the digitalisation of the EU?

How can new EU funds financed by EU borrowing supplement national digital and green funding and EU funds available from the standard seven-year EU budget to accelerate digitalisation?

Speakers: Sam Blackie, Zsolt Darvas, Maria Teresa Fabregas Fernandez, J. Scott Marcus and Ben Wreschner Topic: European Macroeconomics & Governance Date: June 8, 2021
Read about event More on this topic
 

Past Event

Past Event

Women, Covid-19 & The EU Recovery Plan

How can we ensure that the recovery plan doesn’t leave women behind when 84% of working women in the EU aged 15-64 are employed by services that were predominantly impacted by Covid-19 restrictions?

Speakers: Mary Collins, Maria Demertzis, Alexandra Geese, Jacob Funk Kirkegaard, Dan Mobley, Naomi O'Leary and Emma Rainey Topic: European Macroeconomics & Governance Date: June 2, 2021
Read about event More on this topic
 

Past Event

Past Event

Paris Reinforce: From Numbers to Insights: How to think about economic-climate modelling

Join us for the presentation of ‘From Numbers to Insights: How to think about economic-climate modelling’.

Speakers: Haris Doukas, Ajay Gambhir, Glen Peters, Georg Zachmann and Ewelina Daniel Topic: Energy & Climate Date: May 26, 2021
Read about event More on this topic
 

Past Event

Past Event

The work of the future: How are new jobs created and what are the implications for labour markets?

Join us for a presentation of 'New Frontiers: The Origins and Content of New Work, 1940 — 2018' by David Autor (MIT and NBER) and the findings on the source of 'new work' followed by a discussion with an invited panel of academics and policy makers.

Speakers: David Autor, Maarten Goos, Barbara Kauffmann and Georgios Petropoulos Topic: Innovation & Competition Policy Date: May 25, 2021
Read about event
 

Past Event

Past Event

The Future of Work – a conversation with Commissioner Schmit

EU Commissioner for Jobs and Social Rights Nicolas Schmit joins Bruegel for a conversation around the future of work.

Speakers: Mario Mariniello and Nicolas Schmit Topic: European Macroeconomics & Governance, Innovation & Competition Policy Date: May 25, 2021
Read about event More on this topic
 

Past Event

Past Event

After COVID-19: a most wanted recovery

This event, jointly organised with ISPI, as the National Coordinator and Chair of the T20 Italy, is part of the T20 Spring Roundtables and it will focus on strategies for a swift and sustainable economic recovery for Europe.

Speakers: Franco Bruni, Maria Demertzis, Elena Flores, Paul De Grauwe, Christian Odendahl, Miguel Otero-Iglesias and André Sapir Topic: European Macroeconomics & Governance Date: May 19, 2021
Load more posts