EU institutional framework and euro zone crisis

Catherine Sifakis-Kapetanakis (1)

1 CREG - Centre de recherche en économie de Grenoble

This paper explores the impact of Europe's existing institutional framework on the degree of macroeconomic disparity in the Eurozone. It draws son analysis of the costs of this framework as well as of the benefits of European economic and monetary unification. It also highlights how these costs and benefits are distributed geographically. There is a fundamental difference between the economic advantages of European economic and monetary unification, and the costs and risks associated with the system set up to promote unification. Many of the benefits of economic and monetary unification will only really be felt in the medium or even long term. In contrast the impact of the costs incurred by EMU operation is increasingly apparent - and more so as time passes - mainly penalizing the least developed European countries. The thrust of this study is that in its current form the EMU's institutional framework is not viable. It encourages the accumulation of lasting imbalances at the expense of Europe's least developed nations. While giving rise to substantial costs and risks for these countries, it jeopardizes the institutions and mechanisms which would enable them to cope. Imbalances associated with the operation of the EU give rise to negative externalities for the Union as a whole. The emergence of global finance - to which the Single European Act contributed - eveals and accentuates the Community's structural imbalance. To maintain consistent operation of the EMU, the burden of these costs and risks must be shouldered collectively through the coordination and centralization of economic policies and the development of budgetary federalism. But such conditions are extremely difficult to achieve and involve significant costs - some monetary, others not - that should be borne by the most prosperous European countries. These costs give rise to an uncooperative attitude, compromising the EMU as a viable system. One solution which me its consideration would be a reappraisal - on a negotiated and collectively approved basis - of certain aspects of Europe's existing institutional framework.

Mots clés: crise économique; euro; institution; politique monétaire; union européenne; economic crisis; monetary policy; European Union

Domaines: Economies et finances

Catherine Sifakis-Kapetanakis. EU institutional framework and euro zone crisis. 17th workshop on Alternative economic policy in Europe "European integration at the crossroads : deepening or disintegration ?", EuroMemo group, Sep 2011, Vienne, Austria. ⟨halshs-00905991⟩