December 29, 2017
With the recent development of the Banking Union and Outright Monetary Transactions (OMTs), it appears as if Eurozone reforms are on the rise. The adoption of OMTs into law came after an European Court Justice (ECJ) rebuke to German disapproval, arguably the first time in Eurozone history that German preferences were considerably overrode. In a similar vein, the establishment of a single supervisory mechanism (SSM) has transferred supervisory banking power to the supranational level. Debt and deficit targets under the Treaty for Stability, Coordination, and Governance (TSCG), are being met at higher rates than pre-Sovereign Debt Crisis, in large part due to the introduction of the European Semester. These measures are just a few examples of the significant reforms undergone in the monetary and fiscal sectors of the EU over the past ten years. The institution of these reforms upon second glance, however, paints a picture not of “too much, too soon,” but “not enough, too late.”
The Economic Affairs policy team sat down with two 89ers to discuss this point.
Maxi Leuchters is a Master’s student at the LSE, undertaking a degree in European Union Politics, with a specialisation in State and Economy. Marina Favaro is a Master’s student at Cambridge, undertaking a degree in International Relations.
Policy team: “Hi everyone. Thanks so much for sitting down with me today: I wanted to ask you a couple of questions regarding your perspective on being a European citizen, and how European institutions have dealt with the fallout from the Euro Crises. To begin, how would you describe your relationship with the EU, do you feel it provides you with an identity as a European citizen?”
Marina: “To be honest, I think that the EU from an institutional perspective is quite comprehensive. On a large scale, they are effective at achieving many of the tasks they have set out to do. For example if you look at their trajectory of success in establishing greater transparency, such as the new comitology regulations in 2011, it is ongoing. As a European citizen, however, I don’t feel as if I have a voice of influence over any of the processes and I don’t think that the mechanisms established have helped me feel more connected to the EU: I see it more as an institutional apparatus. I did not vote in the 2014 European Parliament elections.”
Maxi: “It’s complicated, but to be honest I’m with Simon Hix. There is currently no possibility to influence the policy agenda of the Commission, and a democratic deficit exists. As someone who works for the trade union in Germany, I find this incredibly disillusioning and frustrating. It alienates me, as a European, from the European policies that I work on.”
Policy team: “Let’s move on to European identity in the context of the Eurozone. If you could speak to your experience during and after the Euro Area Crises, by which I mean the Financial and Sovereign Debt Crises.”
Maxi: “Well in Germany, our economy stabilised quite quickly, in part due to Keynesian measures and strong trade unions. Our unemployment rate is very low, as opposed to Southern European countries, which did not recover as quickly as the Troika hoped. This speaks to the overall issue, I think, which is that we have not yet taken enough measures to prevent crises like this from happening again, and there is still too much fragmentation between economies.”
Marina: “I would tend to agree with Maxi. Within the eurozone, a top-down elitist narrative exists, stemming from economically strong member states. I think that this has caused underlying problems for the EMU that haven’t been addressed by any of the reforms put in place after the Eurozone Crises. As an Italian, it is clear our economy has not recovered in the same way Germany’s has. The implications of the Austerity Crisis are, in many ways, still ongoing. We have high unemployment, stagnated growth. Young people find it very hard to find jobs. There are no EU operations in place to that have decreased the gap in economic inequalities throughout Europe, which I think is a necessary step for reconnecting European economies, and ultimately, Europeans.”
It is evident from both student’s perspectives that not enough is currently being done to restore European citizen’s faith in the EU. While generalising their perspectives as consistent with European views as a whole may be a bit forward, their feelings surrounding transparency and participation deficits in the EU embody a familiar dialogue heard from European youth. Likewise, they both emphasised the lack of actual change post Euro Area Crises, and the need for a greater convergence of economic policies. On an executive level, this call is also being voiced. This year, President Emmanuel Macron came out in favour of significant Eurozone reforms, arguing their necessity for a free and fair Europe. Among other things, he was a proponent of a European finance minister, a European finance budget and parliament, and increased harmonisation of tax policies. A leaked German Finance Ministry non-paper, although not as ambitious in scope, also posited the need for credible stabilisation operations, structural reforms, and increased fiscal responsibilities. Governments are beginning to recognise the need for greater Eurozone reform if ideas are to be translated into change. The 1989 Generation Initiative has recognized this pattern of change, and wants to participate in the creation of this environment, which we believe can play a serious role in reconnecting the institutions of Europe with its citizens.
On that note, the Economics Affairs team has put forward a theme of monetary and fiscal solidarity. In other words, how can we influence monetary and fiscal policy convergence to become more equalised? If European member states were to have greater shared liability, such as debt mutualisation or fiscal discretionary measures, Southern European member state economies would enjoy greater symmetry with Northern ones. This would aid in the eradication of issues such as low unemployment rates, poor wage growth, and social expenditure cuts. And ultimately, this would aid in the eradication of overall inequality between member states, which has negatively influenced European citizen’s views on the EU.
In order to reconnect Europe with its citizens we must remember that this relationship forms the foundation of the European project, and its continued sustenance is critical for sustained growth: within the Eurozone and within Europe.
Be part of the discussion! Join the 1989 Generation Economics Roundtable at “A New Deal for Europe: Reconnecting the EU and its Citizens” at the London School of Economics and Political Science in February 2018.
About the author: Kaelin Hickford, Policy coordinator for Economic Affairs at 1989 Generation Initiative