Written by Angelos Delivorias,
In the European Union (EU), although economic policy is the remit of each Member State, there is, nevertheless, multilateral coordination of economic policies between individual countries. This framework was put severely to the test during the global financial crisis and the European sovereign debt crisis. Partly as a result, recovery in the EU was slower than recovery in the United States, and was not achieved equally by all Member States. Furthermore, it has to a large extent been based on accommodative fiscal and monetary policies that only partly hide underlying signs of fiscal or financial fragility in some countries.
To remedy this, the European institutions began a twofold process in 2011: initiatives were taken to strengthen the current framework for economic governance, and for banking supervision in the euro area while, in parallel, discussion began on possible ways to reduce the economic divergences between Member States, provide incentives for risk reduction and risk-sharing, render the governance process more transparent and ensure democratic accountability. In this latter area, several initiatives – which did not require changes in the EU Treaties – were taken between 2015 and 2017.
In summer 2017, discussions on deepening the policy framework for economic and monetary union (EMU) intensified. This process, which was advocated in the five presidents’ report (by the heads of the relevant EU institutions) and should be completed by 2025, is now being considered at Member State level. The current state of play points towards two main orientations, dividing Member States into two groups: those that prioritise risk-sharing measures (such as France), and those that argue instead for further risk-reduction initiatives (for example, Germany). This lack of consensus has so far meant that the European Council has not been able to reach a breakthrough.
Read this complete briefing on ‘EU policies – Delivering for citizens: Economic policy‘ in the Think Tank pages of the European Parliament.