Reconciling Governance and Model:
a Five-Fold Narrative for Europe
Brussels, Belgium, 25 April 2013
The undeniable economic governance achievements which have prevented the monetary union form collapsing deflected the attention from the challenge of rising unemployment and inequalities to which European citizens are confronted. Europe is therefore revealing an instinct for survival under emergencies, but at the expenses of a common purpose. The Institute of European Democrats and the Madariaga – College of Europe Foundation believe that a fivefold narrative for further integration in key areas would have the potential to break this deadlock and to reconcile the integration path with a fairer economic model. As such, they are jointly organising the conference “Reconciling Governance and Model: a Fivefold Narrative for Europe” with the support of the European Parliament, in order to gather leading European experts to expound their views and recommendations on the future of industrial policy, taxation, fiscal policy, banking regulation, and monetary policy.
Re-industrialising the Eurozone?: After years of hostility toward state intervention in the economy, the idea of an industrial policy for Europe that goes beyond the competition and state aid disciplines is back. Is there a potential for re-industrialisation in a context affected by demographic decline, and how to channel this potential in order to make current account sustainable in the Eurozone? What kind of mix between framework aspects, horizontal and sectoral measures should be adopted in order to turn industrial policy into a springboard for employment, and which type of financing should be envisaged for that?
Is Tax Harmonisation or Centralisation the Way to preserve Progressive Taxation?: Is tax competition as a paradigm for the single market at odds with the monetary union? Is it time to create a less asymmetric environment for SMEs and large businesses in order to reduce the compliance costs of SMEs, which are at the backbone of any strategy for growth and jobs? What should be left as the competencies of member states and what should be transferred to the European level and with which legitimacy?
Making Sense of a Fiscal union: Does the Eurozone Need its Own Budget?: In the absence of a proper budget, the Eurozone periphery has been required to take the burden of adjustment by balancing its fiscal and external account stance. Does this approach risk not ensuring the exploitation of comparative advantages, which should arise naturally both in a monetary union and a single market? Would a separate budget for the Eurozone correct this approach, fuelling also a sense of common purpose and not just a resilience to emergencies? How to finance it?
How to Integrate the European Banking System? Europe is finally endowed with a Single Supervisory Mechanism, but many obstacles are arising down the road towards a full banking union. Europe is left with a vulnerable banking system due its fragmentation along national lines, which makes the actual rescue still national and transfers fragility to the real economy which is left short of credit. How to overcome the national resistances about ex ante resolution mechanisms and deposit insurance schemes? Is this issue related to the single market, or rather to the financial stability of the EMU in terms of breaking up the feedback loops between banks and sovereigns and making the transmission mechanisms of monetary policy work smoothly?
Which Future Role for the ECB?: With the OMT the ECB has taken decisive steps to ensure the survival of the Eurozone by lowering the spreads. But a debate began on the future of the institutions, especially after taking over the responsibility on banking supervision. On the prudential side, should the SSM be extended to all banks and not just systemic ones, considering the role sensitiveness of local banks to real estate cycles? On the macroeconomic side, should the ECB be held responsible for financial stability as well as price stability and what does financial stability mean? Should it act as a proper liquidity backstop for the ESM, or rather openly accept the role of lender of last resort? And finally, should it start targeting unemployment?