The challenges of the eurozone governance after the Greek crisis

Speakers: Suardi Massimo, Flores Elena, Berès Pervenche, Ciavarini Azzi Michele
Moderator: Defraigne Pierre

On Tuesday, September 22nd PubAffairs Bruxelles hosted a discussion on the theme of the challenges of the Eurozone after the Greek crisis, with our distinguished speakers Mr Massimo Suardi, Deputy Head of Cabinet of Vice-President Valdis Dombrovskis, Mrs Elena Flores, Director for International economic and financial relations, global governance, European Commission, Mrs Pervenche Berès MEP, Member of the Committee on Economic and Monetary Affairs of the European Parliament.

Mr Michele Ciavarini Azzi, President of the Union of the European Federalists (UEF) – Belgium, also contributed to the debate with an introductory speech.

The debate was moderated by Professor Pierre Defraigne, Executive Director of the Madariaga – College of Europe Foundation.

As an introduction, Mr Michele Ciavarini Azzi presented the Union of European Federalist – Belgium (UEF), and explained the history, the goals and the activities of the organisation. He emphasised the pivotal importance of the issue of economic governance for the European Union and highlighted the urgency for the European Institutions to take further action in order to foster Europe’s cohesion. He finally presented to the audience the UEF position on the eurozone governance.

Mr Suardi started his intervention by underlining the timeliness of these types of discussion as the European Commission was beginning the implementation of the so called “Five Presidents’ Report” by discussing with various concerned parties – ranging from Member States to civil society organisations – the actions embedded in the content of the document. Regarding the connection between the Greek crisis and the issue of the eurozone governance, he considered that future governance reforms should not be tailored according solely to the experience of the Greek case. The Greece cased was unique in many of its aspects and it was important to consider the broader experiences acquired with the unfolding of the economic and financial crisis, including those from other countries as well as from the emergence of a serious threat for the eurozone as a whole. He added that the refugee crisis is putting into perspective the questions emerging from the eurozone difficulties and that both highlighted the need for greater EU internal cohesion.

Mrs Flores started her intervention by stating that the challenges of the eurozone governance did not emerge when the Greek crisis erupted, but rather when the 2008 economic crisis was starting to produce its effects. However, the Greek case has compelled the European Union to put in place instruments which did not exist previously and has strengthened the case for changes in the economic governance as well as triggered the likelihood of taking decisions. If recent changes in economic governance were taken under pressure, now it is time to look for additional steps to develop and consolidate the economic governance framework. Mr Flores added that the economic crisis should be considered as a stress test for the EU and that the critical point of this policy process is the capacity of the EU to react immediately. She explained that one of the key features of the current discussions on EU economic governance is to provide certainty about the complete design of EMU and the steps to be taken to reach it (namely the second and the first phase in the Presidents report). Mrs Flores concluded by saying that the refugee crisis is closely connected with economic governance as it involves a reflection on the questions of the EU budget, Europe’s demographics and labour market integration.

Mrs Berès began her speech by underlining the connection between the public opinion concerns and the question of the eurozone governance. She recalled that the failure of the European project is a possibility which many have now considered even though before the Greek crisis it was almost unthinkable. In her view, this is due to the fact that the European economic and monetary union has not delivered on its pledges as the eurozone is below its optimal level in terms of sustainable growth, job creation and investments. She added that the uncompleted project of European Monetary Union is not only the result of the need for better economic governance, but also a consequence of the lack of political cohesion. She explained that the community method was put in place in order to allow the largest possible policy convergence, whereas the Greek crisis has highlighted a revival of intergovernmentalism. In her opinion, this revival may give short-term, but no long-term answers. Mrs Berès subsequently reviewed several cases in which the internal political momentum of some member states has heavily interfered in the EU decision-making process as result of the above-mentioned process. Mrs Berès also stated that the refugee crisis may help EU citizens to put into perspective the economic crisis, however she doubted that it would have actual benefits for economic governance.

The main focal point of discussion consisted of the lessons learned and the actions which European institutions should take in the near future. Regarding this question, Mr Suardi stated that the Five Presidents’ Report constitutes an ambitious and realistic basis for action as it not only sends a clear political signal by including for the first time the President of the European Parliament, but also builds upon the experience of both the previous reports and the Greek crisis. He said that the report provides for a comprehensive approach which includes the economic, financial, fiscal, democratic legitimacy and accountability aspects of the deepening of European economic integration and offers European institutions some valuable room for manoeuvre. Mr Suardi continued by stating that great advances have also been made in the EU financial sector during the crisis in order to break the link between sovereign debt and the banks’ sufferance and to improve financial supervision. However, as in the case of the Banking union, notwithstanding these advancements, the EU must continue along this path in order to both reduce the risks connected to these domains and to fine tune its economic governance. Mrs Flores replied by elaborating on the question of the EU capacity to react. She stated that the Greek crisis has unveiled the different interpretations of its root causes since a difference of opinion remains between those who believe that compliance with existing rules should be the ultimate solution and those who think that a reform of EU governance is necessary. Mrs Flores said the EU should exploit the momentum for change and foster both an economic convergence among member states and the ability of the eurozone to respond to both asymmetric and symmetric shocks. She concluded by stating that both the Banking and the Capital Market Unions are in her opinion going in this direction. However, steps in other areas remain to be taken, as the Five Presidents report indicates. On the same issue, Mrs Berès stated that the euro crisis is to be considered as a reality check for the EU with special regard to the differences of opinion on the origin of economic governance fatigue, as a correct balance between the application of existing rules and the question of solidarity among member states must be found. She remarked that, given the eurozone setting, the solutions can essentially be found in more worker mobility, more investments as the Juncker Plan pointed out, and/or in a reform of the EU budget. As she considers the first option not optimal, the EU should concentrate on the latter question. Mrs Berès concluded by stating that although the Five Presidents Report is a possible road map for action, the lack of vision, cohesion and solidarity among member states may constitute a serious obstacle to its implementation.

The final part of the debate and the Q&A session also covered the following issues: the role of the European Council, the question of treaty change, the role of public opinion, the orientation of national governments, the last Greek election results, Greece after the Greek crisis, the question of an EU budget, the rise of right-wing and eurosceptic parties, the implementation of the Five Presidents Report, the question of a European Treasury, the relationship between EU institutions and national public opinion, the Brexit question, the interconnection between the various EU polices, the refugee question and the lack of cohesion between member states.

Do you want to go further into the issues discussed in our debate? Check our list of selected sources which we have provided for you

A Deeper and Fairer Economic and Monetary Union, Combining stability with fairness and democratic accountability, European Commission
Speech by Mario Draghi, President of the ECB, Frankfurt am Main, 16 March 2015

Union of European Federalists, Publications

EP tables recommendations for Eurozone governance, European Parliament

Priorities for euro area governance reforms, Bruegel

The eurozone’s ‘five presidents’ report’: An assessment Centre for European Reform

The Governance Report 2015, Hertie School of Governance

Greece and the Fate of the Euro, Project Syndicate