An ever More Polarized Union: The Greek Problem and the Failure of EU Economic Governance. CES Open Forum Series #14 2018-2019

As the Greek economy continues on its downward trajectory, the policy debate has degenerated into a re-enactment of the neoclassics versus Keynesians controversy. Yet, the Greek crisis can be solved neither by more austerity and structural reforms nor by Keynesian reflation. The core problem lies in a form of integration that has systematically weakened the Greek economy while stabilizing a clientelistic mode of interest intermediation. In order to recover, Greece needs a substantial devaluation plus an interventionist industrial policy. Yet, such a form of integration is not palatable to the North West European creditor countries, nor is it attractive to the Greek government as it would require a break with the clientelistic organization of political power while removing the scapegoat of the EU

Imperial legacy? The EU's Developmental Model and the Crisis of the European Periphery. CES Papers - Open Forum #19, 2013-2014

The high hopes for rapid convergence of Eastern and Southern EU member states are increasingly being disappointed. With the onset of the Eurocrisis convergence has given way to divergence in the southern members, and many Eastern members have made little headway in closing the development gap. The EU´s performance compares unfavourably with East Asian success cases as well as with Western Europe´s own rapid catch-up to the USA after 1945. Historical experience indicates that successful catch up requires that less-developed economies to some extent are allowed to free-ride on an open international economic order. However, the EU´s model is based on the principle of a level-playing field, which militates against such a form of economic integration. The EU´s developmental model thus contrasts with the various strategies that have enabled successful catch up of industrial latecomers. Instead the EU´s current approach is more and more reminiscent of the relations between the pre-1945 European empires and their dependent territories. One reason for this unfortunate historical continuity is that the EU appears to have become entangled in its own myths. In the EU´s own interpretation, European integration is a peace project designed to overcome the almost continuous warfare that characterised the Westphalian system. As the sovereign state is identified as the root cause of all evil, any project to curtail its room of manoeuvre must ultimately benefit the common good. Yet, the existence of a Westphalian system of nation states is a myth. Empires and not states were the dominant actors in the international system for at least the last three centuries. If anything, the dawn of the age of the sovereign state in Western Europe occurred after 1945 with the disintegration of the colonial empires and thus historically coincided with the birth of European integration

Can Europe Prosper Without the Common Currency? A Historical Perspective

The Eurocrisis displays an astonishing similarity to the causes of the Great Depression in the form of massive current account imbalances, destabilising capital flows, financial fragility, and the commitment to defending a fixed exchange rate arrangement by means of austerity and internal devaluation. From the interwar economic and political disaster Europe eventually drew the lesson that internal balance had to enjoy priority over external balance, giving rise to a three-decade long period of unprecedented economic growth after the Second World War. As Europe has again stumbled into many of the policy errors that caused the Great Depression, it will need to relearn some of these lessons. In particular, the paper suggests that Europeanisation has gone too far and that rather than completing the monetary Union, Europe's prosperity and political stability would be better served by compartmentalisation of financial markets, vertical industrial policies and an escape clause in the common currency allowing for temporary exit in case of fundamental disequilibria

Democracy and (dis)-integration : the conditions for a legitimate and effective economic and political organization

Our aim in this paper is to address the big questions of today’s European Union, more specifically, the Union’s deep legitimacy deficit that touches upon all aspects of input, throughout and output. We make three main points. (1) That the current crisis of European integration is to be understood as a manifestation of a broader question that concerns the conditions under which liberal democracy and a market economy may be made compatible. (2) That the long-term dynamics of European integration is driven by the inherent tension in democratic systems between representative and effective governance. (3) That the most urgent task facing European integration research is the normative imperative to rethink effective and legitimate democratic practices – who is involved, at what level, in what capacity, together with whom – and to redesign the boundaries of democratic governance between the EU and the member states

The EU's Convergence Dilemma

As economic stagnation continues to mark the EU in the fifth year of the euro zone crisis, political support for integration is waning. The European Parliament elections of 2014 returned a hitherto unparalleled number of Eurosceptic MEPs, with EU-critical parties becoming the largest ones in several Member States. Much of this Euroscepticism is driven by economic polarisation between core and peripheral countries. While an increasing number of voters in the northwestern creditor countries resent having to foot the bill for what they consider economic mismanagement in the periphery, voters in peripheral countries increasingly rebel against what they deem to be an economically catastrophic Diktat from Germany and its allies. Continued political support for European integration will hinge on successful income convergence in the EU but the current dilemma is that such policies might not be politically feasible. Periods of rapid convergence would seem to suggest that success depends on two main policy strategies. First, a monetary policy that promotes credit for productive purposes, leaves inflation control to other instruments, and employs selective credit rationing to prevent asset booms. Second, a vertical industrial policy prioritising selected industrial sectors. The first policy conflicts with the present framework of euro zone monetary policy, but that framework was only installed in the first place because many peripheral countries were desperately in search of an external constraint on domestic distributional conflict. Industrial policies, in turn, require a sufficient degree of state autonomy from business elites in order to be effective, but it is highly questionable whether most states in the EU possess such autonomy. Though there are, as yet hesitant, signs of a reorientation of both monetary and cohesion policy in the EU, the question of the institutional and political preconditions for their successful implementation has been largely neglected

Policy Continuity, Policy Change, and the Power of Economic Ideas

EMU; social policy; economic integration; economics

Can EMU Benefit From the Norwegian Experience?

EMU; economics; Nation-state

EMU and the French Generals

EMU; Nation-state; Sweden; economics