Policy brief

Beyond the Juncker and Schäuble visions of euro-area governance

Two diametrically opposed visions of the euro-area architecture have been put forward. Departing from both Juncker’s and Schäuble’s proposals, the aut

Publishing date: 01 December 2017
Authors: Guntram B. Wolff

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The issue

Two diametrically opposed visions of the euro-area architecture have been put forward. European Commission president Jean-Claude Juncker favours a model that puts the Commission at the centre of fiscal policy decision-making. The former German finance minister Wolfgang Schäuble argues that fiscal surveillance should be centred on a reformed European Stability Mechanism. Juncker’s proposal would over-emphasise the Commission when fiscal policy making is national and would unduly mix the roles of Commission and Council. Schäuble, by contrast, neglects the fact that national fiscal policy matters for the euro area not only for sustainability reasons but also because of the provisioning of public goods, stabilisation policy and effects on inflation and growth. This Policy Brief does not discuss the completion of banking union, which is essential for a stable euro area.

Policy challenge

Fiscal policy making in the euro area will remain a difficult balancing act between national politics and European interests. Departing from both Juncker’s and Schäuble’s proposals, the Eurogroup should be developed into a Eurosystem of fiscal policy (EFP) as the centre of euro-area fiscal governance. The Eurogroup should have a permanent, full-time president, with a mandate to represent the interests of the whole euro area, and who will report regularly to the European Parliament. The Commission would make fiscal policy recommendations to member states; fiscal rules would be reformed. Political, and in some cases market, pressure would increase on countries that fail to comply with recommendations. Ultimate responsibility for debt will remain national. The European Stability Mechanism should become a permanent fire brigade to manage sovereign debt crises, including possible restructurings in extreme cases. Finally, the EU budget should be reformed to focus on European public goods and on a stabilisation function.

About the authors

Guntram B. Wolff

Guntram Wolff was the Director of Bruegel. Over his career, he has contributed to research on European political economy and governance, fiscal, monetary and financial policy, climate change and geoeconomics. Under his leadership, Bruegel has been regularly ranked among the top global think tanks and has grown in influence and impact with a team of now almost 40 recognized scholars and around 65 total staff. Bruegel is also recognized for its outstanding transparency.

A recognized thought leader and academic, he regularly testifies at the European Finance Ministers' ECOFIN meeting, the European Parliament, the German Parliament (Bundestag) and the French Parliament (Assemblée Nationale). From 2012-16, he was a member of the French prime minister's Conseil d'Analyse Economique. In 2018, then IMF managing director Christine Lagarde appointed him to the external advisory group on surveillance to review the Fund’s priorities. In 2021, he was appointed to the G20 high level independent panel on pandemic prevention, preparedness and response. He is also a professor (part-time) at the Solvay Brussels School of Université Libre de Bruxelles, where he teaches economics of European integration.

He joined Bruegel from the European Commission, where he worked on the macroeconomics of the euro area and the reform of euro area governance. Prior to joining the Commission, he was coordinating the research team on fiscal policy at Deutsche Bundesbank. He also worked as an external adviser to the International Monetary Fund.

He holds a PhD in economics from the University of Bonn and studied in Bonn, Toulouse, Pittsburgh and Passau. He taught economics at the University of Pittsburgh and at Université libre de Bruxelles. He has published numerous papers in leading academic journals. His columns and policy work are published and cited in leading international media and policy outlets. Guntram is fluent in German, English, French and has good notions of Bulgarian and Spanish.