EMU

This project, inspired by two essays written for papers at Oxford University, discusses fixed and floating exchange rates and single/optimal currency areas.  Drawing on examples from history, the project focuses on European countries and periods of history when these countries participated in fixed exchange rate policy, floating exchange rate policy, and most recently, with the instigation of the Eurozone, a single currency area.  The paper discusses Mundell’s four criteria for optimal currency areas, and whether or not the European Monetary Union (EMU) is an optimal currency area, or if fixed or floating exchange rates were a better option for the European Nations. 
  It then examines three different “classifications” of European nations not in the EMU.  Fixed exchange rates and single currency areas work best among similarly economically developed countries (which is one reason why the EMU has been so successful over the past 15 years).  First, I will discuss why Great Britain, a country as economically developed as the current EMU countries has not joined the EMU, and whether or not it would be beneficial for Britain to do so.  In the next category, are the less economically developed countries of Eastern Europe.  Within the past two to three years, a few Eastern European countries have either joined (e.g. Bulgaria) the EMU or have begun the process to join.  These countries are drastically less developed than the major Western European countries.  Thus, their individual success in the EMU will be uncertain, as will their affect on the EMU as a whole.  I will discuss current EMU policy on allowing these countries to join (such as having these countries tie their currencies to the Euro—joining the ERM II, and ensuring that inflation remains extremely low within these countries for a number of years), and the effects of their entrance into the EMU.  Lastly, I will discuss the allowance of Eurasian countries such as Turkey into the EMU.  While Turkey is (partially) on the European continent, its economy effectively behaves more like an Asian country than a European one.  Yet, it has begun the process to join the EMU in hopes of achieving not only economic growth, but also viability on the world stage.

The pace of economic integration amongst European Union (EU) member states has accelerated considerably during the past decade, highlighted by the process of Economic and Monetary Union (EMU). Many aspects of the EU's apparatus, however, have failed to evolve in order to meets these new challenges. This book explores the issue of fiscal federalism within the context of EU integration from theoretical, historical, policy and global perspectives. It contrasts the pace of integration amongst EU member states with the failure of financial and administrative apparatus to evolve to encompass fiscal federalism, i.e. the development of a centralised budgetary system. This impressive collection, with contributions from a range of internationally respected authors, shall interest students and researchers involved with European economics and economic integration. Its accessible style will also make it extremely useful to policy-makers and professionals for whom European economic integration is a daily topic of conversation.

"Solidarity is at the same time a foundation of European integration and a condition for its progressive development. This is true for both aspects of solidarity – as a principle of mutual responsibility, and as practical mutual assistance and support. For many years now, the Economic and Monetary Union and the Common European Asylum System have been in a deep crisis. The epicenter of such crises is Greece, but their root lies deeper, in a constitutional and legal framework that hinders the pursuit of the common interest and the development of solidarity. The efforts undertaken so far to remedy these shortcomings are not up to the challenge. And what is at stake is not only the success of two important integration projects, but the preservation of the values on which the Union is founded, above all democracy and fundamental rights.
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La solidarité est à la fois un fondement de la construction européenne et une condition de son développement. Elle l’est dans ses deux dimensions : principe de responsabilité réciproque et action concrète d’assistance mutuelle. Depuis plusieurs années, l’Union économique et monétaire et le Système européen commun d’asile sont en crise. L’épicentre de ces crises est la Grèce, mais leur origine réside, en amont, dans un cadre constitutionnel ou légal empêchant l’affirmation de l’intérêt commun et le développement d’une action réellement solidaire. Les efforts entrepris jusqu’ici pour remédier à ces carences ne paraissent pas à la hauteur des défis. Or, l’enjeu n’est pas seulement la réussite de deux importants projets d’intégration, mais aussi la préservation des valeurs sur lesquels l’Union est bâtie, et tout particulièrement des principes de démocratie et de respect des droits fondamentaux."

Member states of the Eurozone are undergoing a turbulent period both domestically and internationally. On the national front, many countries, including Greece and Spain, have been led to early elections or the collapse of their government as a result of the serious financial and economic crisis. Reforms have been hailed as the panacea to the affected member state’s woes. These reforms have mainly addressed the need to reduce costs, often via labour market reforms.

When analyzed in detail, the countries which are now under scrutiny did not undertake these necessary reforms during times of economic prosperity.  Political determination for change was not matched by willingness to upset the civil society in the short term.  Far-reaching measures must now be implemented in the labour markets and taxation policy convergence should be explored. Only real reform, likely leading towards fiscal union, can ensure a future for any member state within the Eurozone.

To date, critical analysis of the EMU project has largely been advanced from the centre-right spectrum of British politics. Comparable questions from the centre-left have failed to find a coherent voice. Although, the European fault-line cannot be characterized as a neat Left-Right issue there are noticeable divisions in opinion across British business, the trade union movement and within the Labour Party.

Offering a unique insight into this key debate from the ‘centre-left’, eurosceptic view point, this book provides a rigorous analysis of all the salient economic and political issues of concern, such as:

* the economics of a single currency

* employment and social implications

* sovereignty

* political determination.

The arguments presented in this volume highlight the emergence of a coherent alternative to deepening economic integration as a platform to build a just and equitable society.

Contributions are drawn from leading academics, trade union leaders and prominent politicians, both from the Labour Party and the wider progressive Left in British politics. This informative and thought provoking book will be indispensable reading for students and practitioners in economics, politics and international relations, as well as those interested in this highly contentious topic.

[If you are interested in obtaining a hard copy of my paper, please contact me: frederic.allemand@cvce.eu]

Dans sa version originale, le régime communautaire de discipline budgétaire conserve aux Etats membres la liberté de s'endetter, à charge pour eux d'en assurer l'exclusive responsabilité. Dans ce système, le Pacte de stabilité et de croissance rappelle chacun à ses obligations et l'insolvabilité d'un Etat ne se pose pas. La crise des dette souveraines remet en cause cette approche. Dans un contexte économique dégradé, l'insuffisance des efforts de consolidation budgétaire et de réformes structurelles réalisés par plusieurs Etats membres les prive d'accès aux marchés financiers. La mutualisation des dettes souveraines entend répondre à cette difficulté, en même temps qu'elle favoriserait l'émergence d'un grand marché européen des dettes souveraines comparable à celui nord-américain. Epousant des formes multiples (eurobond, union bond, blue/red bond,...) l'idée suppose une dilution de la responsabilité individuelle au niveau de la collectivité et heurte les principes structurels de l'UEM. Sauf à réviser les traités, seule une forme abâtardie de mutualisation confinant à une émission coordonnée de titres de dettes nationaux saurait prospérer.

Economic governance is a tradename: it relates only to fiscal governance. The effectiveness of this incomplete governance is questioned, as national authorities are used to pursue policies contrary to the individual common guidelines and the European Union fails to impose sanctions on Member States when violations of budgetary requirements of the Treaty are recorded . Despite these very large and regular critics against the economic governance, the constitutional and legal framework of Economic and Monetary Union remained quite unchanged since its inception in 1990-1. Since 2010 resolving the sovereign debt crisis calls for a significant reform of the EU legislation through a deep rebalancing of governance. The reform does not lead to a further transfer of powers to the EU, but moves the economic governance from the cooperation method to the integration one... but the redline between them remains uncrossed.