The Future of the Eurozone: Towards a European Benchmark

Sara Casagrande,Bruno Dallago

doi:10.52459/jowett13140122

Abstract

The European sovereign debt crisis has demonstrated the need for a rethinking of the European Integration Project. The strong variety between member countries prevented the Eurozone to become a fiscal and political union and the asymmetric architecture of the European Monetary Union (EMU) revealed different weaknesses. The outbreak of the Covid-19 emergency may represent a turning point for the EU and makes even more evident that the future of the Eurozone will depend also on the ability of member countries to make their institutional frameworks coexist. Helping member countries to achieve sustainable and stable outcomes, although in idiosyncratic ways, is the task of the European benchmark. It is a framework, inspired by European treaties, that aims to identify inefficiencies in terms of market, state and social failures and negative externalities inside economic, social, and political institutions. This benchmark represents a new tool for a correct evaluation of the economic, social, and political performance of the European member countries.

Highlights

The European sovereign debt crisis has demonstrated the need for a rethinking of the institutional architecture at the base of the European Union (EU) project
As evidenced by Varieties of Capitalism (VoC) theory analysis, each member country presents idiosyncratic institutions, each of them can achieve similar efficient, stable and sustainable outcomes, in different idiosyncratic ways, and avoiding negative spillovers. This implies that institutional variety can become the tool that allows understanding how to calibrate the various national policies so that each member country can converge towards an efficient and stable path of development. This analysis seems coherent with Hall (2018, p.25), who suggests that “there is more than one route to economic prosperity, and finding a successful national path requires adapting social and economic policies to the institutional conditions specific to each type of political economy”
A key problem is that the unique monetary policy of the ECB provokes asymmetric shocks among heterogeneous member countries amplifying macroeconomic imbalances

Summary

INTRODUCTION

The European sovereign debt crisis has demonstrated the need for a rethinking of the institutional architecture at the base of the European Union (EU) project. The strong institutional variety between member countries prevented Eurozone to become a fiscal and a political union. Rather than promoting institutional convergence, European institutions should help member countries to make their institutional frameworks work better and coexist, by implementing responsible policies, avoiding moral hazard and non-cooperative attitudes, ensuring stability and soundness, and avoiding negative spillovers. It will be proposed a European benchmark (Eb), inspired by European treaties, as a new tool for a correct evaluation of the economic, social, and political performance of the European member countries.

THE EUROZONE BETWEEN INTEGRATION AND CRISIS

TOWARDS A EUROPEAN BENCHMARK

CONCLUSIONS