The governance of domestic fiscal stability in the Eurozone prior to the financial crises (2000-2007): What lessons for implementation of the TSCG?

After its first thorough revision in 2005, the Stability & Growth Pact (SGP) has recently been transformed into a Fiscal Stability Treaty, which in all likelihood will become operational as from January 1, 2013. Part of this treaty is the incorporation of balanced budget rules into domestic constitutions and into national budgeting processes. These rules concern general government public finances and not only central government budgets. This paper discusses the effectiveness of such domestic rules for general government, by looking at the political capacity of EMU member states to domestically implement EMU fiscal rules in the period 2000-2007 (i.e. before the emergence of the financial crises). Compliance with the EMU rules varied considerably between the –then- euro-12. The paper shows that institutional arrangements to enhance fiscal discipline within central government had almost fully converged between eurozone members and cannot explain these compliance differences. Regarding non-central government sectors it is shown that countries with low compliance either used imposed (rather than agreed) internal stability pacts or did not have such pacts at all. Compliance problems are subsequently explained by looking at the political capacity of countries to deliberate the EMU stability paradigm with all actors involved. Four countries are looked at in particular: Ireland, Finland, Germany and the Netherlands. Based on this case analysis it is argued that central governments that had a high level of ideological dispersion and competition (dispersed governments) were better in such deliberation than single-party or stable coalition central governments (non-dispersed or concentrated governments). Political backlash on the EMU stability paradigm can be expected to be more prominent in the latter case; the emergence of a modified EMU paradigm (and the resulting modification of the SGP) is mainly the result of political backlash on the original paradigm in these states. Finally, some lessons are drawn for the implementation of the new Fiscal Stability Treaty

The Single European Sky: What about the Liability Aspect?

Following the liberation of European air transport in the 90s, the Union has tried to implement dramatic changes by enacting the Single European Sky Regulations (SES). The cornerstone idea of the SES Regulations is to create so-called functional airspace blocks or FABs. These FABs will normally satisfy the growing capacity requirements of all airspace users and minimise delays by managing air traffic more dynamically. This will have as immediate consequences an increase in efficiency. This article will examine each of the Treaties establishing the FABs in detail with regard to the liability aspect only and, while acknowledging their advantages, it will point out the differences in the protection they offer and the consequences the author sees happening. This article will also suggest several improvements. The primary focus of the article is the liability aspect in the FAB Treaties, but references to agreements between ANSPs will also be included. Through showing the advantages of the proposal, this article highlights the hypothesis that the Single European Sky will not bring any changes to the current liability framework; to the contrary, it will further blur the general picture by adding a layer of fragmentation

Post-Crisis Economic and Social Policy: Some Thoughts on Structural Reforms 2.0.

Managing the euro crisis has been a process of institutional transformation for the EU. The European Semester has emerged as a powerful tool for economic policy coordination between the Member States. Beyond the new enforcement tools that the Semester affords the Commission and Council in case of non-compliance with country-specific recommendations, the management of the crisis has given the Commission experience in structural reforms. The Commission now regularly uses this experience in formulating its yearly country-specific recommendations to Member States. Far from a stalwart of untethered neoliberalism, the Commission has been fashioning itself as the manager with a human face, the institution that understands both the structural reform requirements for a global economy, and the special need for strong social institutions that could shield European citizens from the worst of the shocks provoked by globalized markets. Hence the name, “Structural Reforms 2.0,” per the Juncker Commission. In this chapter, I review the Commission’s emerging structural reform “know-how,” as represented in its latest reflection papers and European Semester documents. The European Commission seems to have drawn from its experience in managing loan conditionality for debtor countries like Greece, Portugal, and Ireland, in order to come up with the set of structural reforms that it considers necessary for any country to thrive within the context of the euro. At the same time, it has taken on board the critiques of structural reforms that point to the potentially negative short-term effects of structural adjustment. Thus, the Commission seems to have fully embraced the idea of the EU as a soft alternative to unfettered globalization and has taken it upon itself to monitor certain aspects of the welfare state in Member States. The Commission’s recommendations, however, while presented in the mode of technocratic expertise, entail deeply political choices in almost every imaginable regulatory field. Despite constant assurances that there is no “one-size fits all” model for structural reforms, what is shaping up through the European Semester is effectively a list of desirable reforms—a set menu of options—which the Commission now openly characterizes as “EU best practices.” If applied, they would provoke deep restructurings and adjustments of national political economies with winners and losers to boot. These demands for deep restructurings are couched in a language of technical adjustment and fine-tuning that does not do justice to the qualitative reform required of the Member States nor to the substantive trade-offs between market efficiency and social fairness that only a democratic process can legitimize. Contrary to some observers, I conclude that the inclusion of social policy goals into the European Semester can be an indication of both the success of socially minded actors in influencing the content of macroeconomic governance, and of the success of market-minded actors in adapting to demands for “social fairness” in macroeconomic governance without ceding much space in terms of the kinds of reforms required. Much of this “socialization” of the European Semester will depend on how the rest of the management of the common currency evolves

European Economic Crisis: Ireland in Comparative Perspective

The current economic crisis has hit all European countries hard, but some are much more severely affected others. The problems manifest in European peripheral countries, especially Ireland, Spain, and Greece, have roots in domestic policy mistakes. However, the European context of these policy profiles also needs to be taken into account. The creation of the Euro initially yielded large credibility gains for the weaker economies, extending low interest rates across the Eurozone. But it also introduced a set of perverse incentives toward fiscal expansion which were supposed to be managed at domestic level. Weak European coordinating capacity meant there were few effective external disciplines on national decision-making. The sanctions built into the Stability and Growth Pact proved more controversial and therefore less constraining than originally envisaged. The problems accumulating in the weaker economies made them particularly exposed to crisis when the downturn came. The crisis is not merely one of peripheral economies’ policy errors, but extends to the design of European decision-making and the management of monetary union. These issues are explored with reference to the Irish case: the crisis of the Irish and other peripheral economies points to a crisis at the heart of European politics.

The European Context of Ireland’s Economic Crisis

The current economic crisis has hit all European countries hard, but some are more severely affected than others. The problems manifest in European peripheral countries that are also members of the Eurozone, that is, Ireland, Spain, and Greece, have roots in domestic policy mistakes. However, the European context of these policy profiles also needs to be taken into account. The creation of the Euro initially yielded large credibility gains for the weaker economies, extending low interest rates across the Eurozone. But it also introduced a set of perverse incentives toward fiscal expansion which were supposed to be managed at domestic level. Weak European coordinating capacity meant there were few effective external disciplines on national decision making. The sanctions built into the Stability and Growth Pact proved more controversial and, therefore, less constraining than originally envisaged. The problems accumulating in the weaker economies made them particularly exposed to crisis when the downturn came. The crisis is not merely one of peripheral economies’ policy errors, but extends to the design of European decision making and the management of monetary union, and to the underlying structural differences in relative trade capabilities between Eurozone member states. These issues are explored with reference to the Irish case: the crisis of the Irish and other peripheral economies points to a number of unresolved difficulties at the heart of European politics.

The structural invisibility of outsiders: the role of migrant labour in the meat-processing industry

This article examines the role of migrant workers in meat-processing factories in the UK. Drawing on materials from mixed methods research in a number of case study towns across Wales, we explore the structural and spatial processes that position migrant workers as outsiders. While state policy and immigration controls are often presented as a way of protecting migrant workers from work-based exploitation and ensuring jobs for British workers, our research highlights that the situation ‘on the ground’ is more complex. We argue that ‘self-exploitation’ among the migrant workforce is linked to the strategies of employers and the organisation of work, and that hyper-flexible work patterns have reinforced the spatial and social invisibilities of migrant workers in this sector. While this creates problems for migrant workers, we conclude that it is beneficial to supermarkets looking to supply consumers with the regular supply of cheap food to which they have become accustomed

Foundation Focus (Issue 18): Workers in Europe: Mobility and Migration

[Excerpt] This issue of Foundation Focus looks at mobility and migration in the EU. It reviews the policy background and the practical issues that relate to movement between EU countries by EU citizens and into the EU from third countries. What is the extent of labour mobility within the EU? How can the fundamental rights of refugees and migrants from outside the EU be protected? How does intra-EU mobility impact on public services? What have social partners done to address the integration of third-country nationals and challenges for EU labour markets? What has already been learned about successful local integration policies for migrants? It draws on Eurofound’s extensive research findings in this area

Quality of Life, Public Services and the Crisis

This issue of Foundation Focus looks at impacts of the crisis on quality of life in Europe. Has quality of life worsened? Have all sections of society borne the impact equally, or have some ill-favoured groups been particularly affected? How do European citizens rate the quality of their public services since the onset of the crisis? Do these services – such as healthcare and childcare – do the job that is asked of them? If not, how can public services and the European welfare state change to meet a new reality? And what of the public sector workers who are responsible for the delivery of many of these services: how has their working situation changed since 2008

The illusion of comparable European IFRS financial statements. Beliefs of auditors, analysts and other users

Reaching higher comparability was one of the main goals of the implementation of the International Financial Reporting Standards (IFRS) in the European Union in 2005. However, national accounting traditions and cultural differences continue to cause differences in the application of IFRS (KPMG & von Keitz, 2006). European IFRS financial statements might therefore be less comparable than users of these statements possibly assume. This study contributes by determining to what extent auditors, analysts and other users of European IFRS financial statements believe that these statements are comparable and what they perceive to be the most important problem areas when it comes to comparability. Our survey of 426 individuals reveals that only 41% of the respondents believe that European IFRS financial statements are comparable. The more experienced respondents are, the less they believe in the comparability of these statements. Overall, 13 areas are perceived as problematic for the comparability of IFRS financial statements by at least half of the respondents. The three main issues that appear in most of these problem areas are interpretation differences, subjectivity and disclosure differences.Comparability, European IFRS financial statements, survey

The Eurozone Crisis: Institutional Setting, Structural Vulnerability, and Policies

The unfolding of the crisis in the Eurozone can be explained by the interaction of institutional features and policy failures, and by their interconnection with real and financial imbalances. The crisis has shown that internal divergence in the EZ is based on important structural components which are unsustainable in the long run. Indeed, the crisis has magnified the gap between the vulnerable peripheral member countries and a more resilient core. The paper analyses those factors that opened the way to the diffusion of the financial and economic crisis in the Eurozone. It also discusses the structural consequences of these events and critically analyses the institutional and political reforms which the Eurozone is facing in order to enhance its capability to cope with external shocks.Eurozone; European Union; European Monetary Union; euro; Common fiscal parameters; Real convergence; Productivity