Can the eurozone’s economic governance combine political accountability, legitimacy and effectiveness? EPC Discussion Paper, 1 September 2015

After years of economic crisis, resulting in significant changes to economic governance at EU level, especially for the eurozone, the time has come to consider the longer term political and economic implications of this new situation for the economic integration process. Not only to determine how well the system is likely to function but also what more needs to be done to ensure long-term stability and to provide the EU institutions with sufficient political legitimacy to carry out this new role. This article does not consider abolishing the euro, based on the conviction that introducing the euro created a path dependency that makes trying to unpick the seams of the process extremely costly. While, economically, the exit of one eurozone member state might conceivably be manageable (but costly, especially for that country), the long term political costs might end up unravelling the whole European integration process, with the potential for a bankrupt and politically unstable state outside the euro but still within the EU. However, the status quo situation is still unstable, politically and economically, and needs further policy reforms.

Economic Policy Coordination in the Euro Area under the European Semester. CEPS Special Report No. 123, December 2015

The implementation record of the Country Specific Recommendations (CSRs) has declined over time, as financial turbulence lessened and the economic outlook started to improve. Urgency for reforms seemingly receded to leave room to request member states to move towards more accommodative stances. It is mainly the small countries that implement, at least partially, the recommendations addressed to them. Unfortunately, there is little that the EU can do to change the status quo. Yet, the President of the Eurogroup could be held accountable for the implementation of the recommendations addressed to the euro area. The creation of National Competitiveness Boards risks making the European Semester even more complex and likely to have little impact in the countries that need them most, namely large countries and those with poor governance. To make it effective, a procedure would be needed to make national wage norms consistent at the euro-area level, which may be a very difficult objective to achieve.