Economic Stability and Economic Governance in the Euro Area:What the European Crisis Can Teach on the Limits of Economic Integration

The recent European economic crisis has dramatically exposed the failures of<br/>the various institutional mechanisms in place to maintain economic stability<br/>in Europe, and has unveiled the difficulty in achieving international coordination<br/>on fiscal and financial stability policies. Drawing on the European<br/>experience, this article analyzes the concept of economic stability in international<br/>law and highlights the peculiar problems connected to its maintenance<br/>or promotion. First, we demonstrate that policies that safeguard and<br/>protect economic stability are largely regulated and managed at the national<br/>level, due to their inextricable relationship with the exercise of national political<br/>power. Until recently, more limited levels of pan-European integration<br/>did not make the coordination of economic stability policies seem necessary.<br/>However, a much deeper level of economic integration makes it very difficult<br/>to tackle an international economic crisis through national responses. If EU<br/>Member states wish to maintain and deepen economic integration, they<br/>must accept an erosion of sovereignty over their economic stability policies.<br/>This will not only deprive states of a fundamental anchor of political power,<br/>but also create a challenge for the maintenance of democratic control over<br/>economic policies. Second, this article argues that soft law approaches are<br/>likely ineffective in enforcing the regulatory disciplines required to ensure<br/>economic stability.