Virtual forum: Eurozone Crisis and Implications for Transatlantic Economic Relations
On October 7, Jean Pisani-Ferry, the director of the Brussels based think tank Bruegel, presented his views on the internal dynamics of the European sovereign debt crises and his ideas for the way forward. At the event titled “The Eurozone crisis and Implications for the Transatlantic Economic Relationship”, Mr. Pisani-Ferry provided an overview of the […]
On October 7, Jean Pisani-Ferry, the director of the Brussels based think tank Bruegel, presented his views on the internal dynamics of the European sovereign debt crises and his ideas for the way forward. At the event titled “The Eurozone crisis and Implications for the Transatlantic Economic Relationship”, Mr. Pisani-Ferry provided an overview of the factors that contributed to the crisis within the EU by stressing that policy inconsistencies, related to regulatory frameworks, supply side policies, and a lack of integration within the single market, significantly contributed to the rapid erosion of stability within the eurozone.
In his initial comments, Mr. Jean Pisani-Ferry addressed the underlying challenges facing the eurozone, ranging from a lack of fiscal discipline to a loss of competition, which arose due to insufficient integration within the single market. As the monetary union expanded at an increasingly rapid pace, mandatory policies related to budgetary goals and regulatory mechanisms had not been implemented by certain member states, nor sufficiently enforced by EU institutions. Thus a number of policies within certain member states were conducted inconsistently with the rules established for member participation within the monetary union. Mr. Pisani-Ferry stated that these policy failures occurred in sectors related to budgetary, tax, wage, and regulatory policies. “Most Prime Ministers, in my opinion, thought that the monetary union was the business of central bankers…and that for the rest they could continue running the same policies without taking on board the implications of being in a monetary union.” According to the speaker, Finland, which had faced a crisis in the 1990’s, represented a notable exception as it had put in place safeguards to prevent the risk of policy inconsistencies from emerging and threatening its compliance with regulatory standards set by the EU.
In the later stages of Mr. Pisani-Ferry’s presentation, he focused on EU reform measures and the way forward for the eurozone. First, he mentioned that although tough fiscal austerity programs have led to a challenging political climate for leaders in various member states, the adjustments represent a very necessary step in alleviating policy inconsistencies and, in light of the crisis, will be carried out with a sense of urgency. On a positive note, the speaker highlighted Greece and Spain as two members, which have made good on their promises for immediate reform by implementing swift and more ambitious adjustment plans than had originally been anticipated. However, whether the reforms will produce the desired effect with regard to exchange rate stability and whether implementing tough austerity measures over the long run will cause fatigue among political elites in certain member states has yet to be determined. With regards to EU crisis management legislation, Mr. Pisani-Ferry stressed that the priority for policy makers in Brussels will be to prevent anti-crisis mechanisms from devolving into a safety net for reckless lenders and member states with inconsistent fiscal policies. An initial step to ensuring transparent and sustainable fiscal policies will be to further centralize the surveillance of national budgets without impinging on the sovereignty of individual member states. In his assessment of the European Union’s prospects of competing as a global economic power, Mr. Pisani-Ferry stated that although the EU has been fighting for prominence on the world stage, it has been forced to turn inwards due to the sovereign debt crisis. Yet the precedent set through the EU’s cooperation with the IMF in establishing formulas for member state rescue packages, has shed light on the EU’s ability to lead by example on the world stage in forging collaborative policies between international and regional institutions in times of a severe economic downturn.