What Schengen can learn from the Euro crisis

Research Paper by Pálma Polyak



This paper identifies five key lessons of the euro crisis with implications for the Schengen area. Assessing economic and political costs of disintegration in both cases, it concludes that path dependency is present and also decreases probability of a permanent dismantling of the passport-free area. Looking at the development of necessary institutions for risk sharing, the Eurozone provides an example for incremental progress, with reform efforts losing momentum once the pressure eases. Both crises showed patterns of “go it alone” strategies, with self-seeking actors giving up on mutually beneficial outcomes; for these, Member States need to invest in rebuilding trust and bringing polarized positions closer. In both cases, fundamental problems cannot be addressed without an agreement over a crisis narrative and common approaches to the policy fields in question, including a common ground on immigration and refugee policy. Crisis management mechanisms need to be bolstered, with non-majoritarian institutions only used as a last resort.