Hostname: page-component-84b7d79bbc-dwq4g Total loading time: 0 Render date: 2024-07-30T20:21:50.325Z Has data issue: false hasContentIssue false
  • English
  • Français

The Failure of European Governance of the Crisis

Published online by Cambridge University Press:  30 June 2014

Javier Bilbao-Ubillos
Javier Bilbao-Ubillos*
Affiliation:
Department of Applied Economics I, University of the Basque Country, (UPV/EHU)-Spain, Avda. Lehendakari Agirre, 83, 48105 Bilbao, Spain. E-mail: javi.bilbao@ehu.es
Get access Rights & Permissions [Opens in a new window]

Abstract

The current euro crisis, considered by the IMF to be the new heart of the international economic crisis, has its historical roots in the process of construction of the European Monetary Union (EMU). The resulting architecture of economic governance in the EU has revealed itself to contain serious shortcomings in both ideological terms (design of a coherent exit strategy) and institutional terms (procedures, irreversibility and implementation times of the decisions made). As a result, the responses made by Europe have been late, hesitant, sometimes lacking in intensity and inconsistent in their attempts to manage the crisis.

Type
Articles
Information
European Review , Volume 22 , Issue 3 , July 2014 , pp. 361 - 381
Copyright
Copyright © Academia Europaea 2014 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

References and Notes

1.‘European Monetary Union remains fragile because of a flaw in its governance’ See De Grauwe, P. (2006) What have we learnt about monetary union since the Maastricht Treaty? Journal of Common Market Studies, 44, p. 728.Google Scholar
2.An optimum design would have required recourse to one of the following: a high level of mobility of the labour factor; greater flexibility of prices and wages (the possibility of internal devaluation); or, in their absence, sufficient fiscal integration to enable the exchange rate to be substituted at least partially as a mechanism for adjustment to external shocks affecting different Member States asymmetrically. However, none of these three conditions exists in the EMU: the devices intended to mitigate these shortcomings in terms of preventing imbalances within the European area, established basically in the Stability and Growth Pact, have failed to work. Moreover, some authors – for example, Toribio, J. J. (2011) Áreas monetarias óptimas y la experiencia europea: algunas reflexiones. Información Comercial Española-Revista de Economía, 863, pp. 13–19 – assert that Spain (and perhaps also Portugal, Greece and other countries) entered the single currency framework at an artificially low parity, which conditioned the subsequent movements of their economies.Google Scholar
3.After all, to all intents and purposes it is as if the countries of the euro zone were borrowing in foreign currency. See De Grauwe, P. (2011) The governance of a fragile eurozone. Centre for European Policy Studies Working Paper, no 346 (Brussels: CEPS).Google Scholar
4.Directorate-General for Economic and Financial Affairs at the European Commission (2009) Economic Crisis in Europe: Causes, Consequences and Responses. European Economy 7/2009 (Luxembourg: Publications Office of the European Union), pp. 27–30.Google Scholar
5.Busch, K. (2012) Is the Euro Failing? Structural Problems and Policy Failures Bringing Europe to the Brink (Berlin: International Policy Analysis-Friedrich-Ebert-Stiftung).Google Scholar
6.Caballero, J. C., García, P. and Gordo, E. (2011) La reforma de la gobernanza económica en la UEM. Banco de España Economic Bulletin, January, pp. 118–134.Google Scholar
7.Van Rompuy, H. (2012) Towards a Genuine Economic and Monetary Union. Report by President of the European Council, 5 December 2012, pp. 11–12.Google Scholar
8.Kagancigil, A. (1998) Gouvernance et science: modes de gestion de la société et de production du savoir empruntés au marché Revue Internationale de Sciences Politiques, 155, pp. 73–84.Google Scholar
9.Celedón, C. and Orellana, R. (2003) Gobernancia y participación ciudadana en la reforma de salud en Chile. Paper presented at the Tercer Foro Interamericano Subregional de Liderazgo en Salud. January 2003. Buenos Aires.Google Scholar
10.Longo, F. (2012) Innovación en gobernanza: entornos colaborativos y liderazgos relacionales. Ekonomiaz-Revista vasca de Economía, 80, pp. 32–95.Google Scholar
11.Borrás, S. and Radaelli, C. M. (2011) The politics of governance architectures: creation, change and effects of the EU Lisbon Strategy. Journal of European Public Policy, 18(4), pp. 463–484.CrossRefGoogle Scholar
12.European Commission (2001) European Governance. A White Paper. COM (2001) 428 final. Brussels, 25 July 2001.Google Scholar
13.Conde, F. (2004) Constitución europea y gobernanza económica. Quaderns de Política Económica-Revista electronica. 2nd época, Vol. 8.Google Scholar
14.Up to that time most authors devoted their efforts basically to analysing the process of European integration from the theoretical perspectives of federalism, functionalism or neo-functionalism.Google Scholar
15.Marks, G. (1993) Structural policy and multilevel governance in the EC. In: A. W. Cafruny and G. Rosenthal (eds), The State of the European Community. Vol. 2: The Maastricht Debates and Beyond (Boulder/Harlow: Lynne Rienner).Google Scholar
16.European Commission (2012) Report from the Commission: Alert Mechanism Report. Report prepared in accordance with Articles 3 and 4 of the Regulation on the prevention and correction of macro-economic imbalances. COM (2012) 68 final. Brussels, 14 February 2012.Google Scholar
17.Watt, A. (2011) Economic governance in Europe in the wake of the crisis: reform proposals and their alternatives. European Review of Labour and Research, 17(2), pp. 255–261.Google Scholar
18.For instance the Conclusions of the European Council of 29 June 2012 on the possibility of direct recapitalisation for Spanish banks from community instruments were subsequently reinterpreted in a joint communiqué following a meeting held in Helsinki on 25 September by ministers from Germany, the Netherlands and Finland.Google Scholar
19.In 1999–2007, Slovenia, Slovakia, Greece, Ireland, Spain, Cyprus, Portugal and Italy – in that order – suffered the biggest increases in these costs in the EMU as a whole. See J.L. Malo de Molina (2011) La crisis y las insuficiencias de la arquitectura institucional de la moneda única. Información Comercial española-Revista de Economía, 863, p. 26.Google Scholar
20.Spanish banks looked to international markets for finance: e.g. in the summer of 2007 the outstanding balance of mortgage loans issued by Spanish banks stood at over €300 billion: 30% of GDP. See Díez, J. C. (2012) Naturaleza y causas de la crisis del euro. El futuro del euro. Libro marrón 2012 (Madrid: Círculo de empresario, p. 85.Google Scholar
21.Between 2000 and 2007 there were seven countries that broke the deficit rule, and four of them were clearly ‘repeat offenders’: Greece broke it eight times, Germany five, Portugal four, Italy four and France three.Google Scholar
22.De Grauwe, P. (2011) The governance of a fragile eurozone. Centre for European Policy Studies Working Paper, no 346 (Brussels: CEPS).Google Scholar
23.Greece accounted for a scant 2% of the Community’s GDP, while the countries affected by the sovereign debt crisis in 2012 account for a third of it. See Díez, J. C. (2012) Naturaleza y causas de la crisis del euro. El futuro del euro. Libro marrón 2012 (Madrid: Círculo de empresario).Google Scholar
24.IMF (2012) World Economic Outlook. Coping with High Debt and Sluggish Growth (Washington: IMF), p. 16.Google Scholar
25.Donges, J. B. (2012) Crisis europea y el reto de una gobernanza económica eficaz. In: El futuro del euro. Libro marrón 2012 (Madrid: Círculo de empresarios), pp. 103–138.Google Scholar
26.Weidmann, J. (2012) Money Creation and Responsibility. Speech at the 18th Colloquium of the Institute for Bank-Historical Research (IBF) in Frankfurt, p. 4. 18 September 2012.Google Scholar
27.Reinhart, C. M. and Rogoff, K. S. (2010) Growth in a time of debt. American Economic Review: Papers & Proceedings, 100, p. 573.Google Scholar
28.Herdnon, T., Ash, M. and Pollin, R. (2013) Does high public debt consistently stifle economic growth? A critique of Reinhart and Rogoff. Political Economy Research Institute Working papers Series, no. 322.Google Scholar
29.For instance France, Belgium and Spain took such positions in regard to shares in financial institutions; and Italy on shares traded on regulated markets as from 1 December 2011. In Spain, the National Stock Exchange Commission decided on 1 November 2012 to extend the ban in Spain until 31 January 2013, alleging the favourable report by the European Securities Markets Authority as its reason.Google Scholar
30.Since 2010 the Spanish Stock Exchange Commission has required that it be informed of all short positions on any quoted Spanish security in excess of 0.2% of capital stock (although these will not be reported to the market) and has undertaken to announce to the general public any bearish investments in excess of 0.5% of capital.Google Scholar