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The Euro Area Crisis Management Framework: Consequences for Convergence and Institutional Follow-ups

Author

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  • Belke, Ansgar

    () (University of Duisburg-Essen)

Abstract

The current instruments in the EU to deal with debt and liquidity crises include the European Financial Stability Facility (EFSF) and the European Financial Stabilisation Mechanism (EFSM). Both are temporary in nature (3 years). In terms of an efficient future crisis management framework one has to ask what follows after the EFSF and the EFSM expire in 3 years time. In this vein, this paper addresses the question of the political and economic medium- to longterm consequences of the recent decisions. Moreover, we assess what needs to be done using this window of opportunity of the coming 3 years. Which institutions need to be formalized, into what format, in order to achieve a coherent whole structure? This paper presents and evaluates alternatives as regards the on-going debate on establishing permanent instruments to support the stability of the euro. Among them are the enhancement of the effectiveness of the Stability and Growth Pact combined with the introduction of a “European semester” and a macroeconomic surveillance and crisis mechanism, fiscal limits hard-coded into each country’s legislation in the form of automatic, binding and unchangeable rules and, as the preferred solution, the European Monetary Fund. Finally, it elucidates the political constraints of the ECB, assessing the EFSF and Eurobond solutions.

Suggested Citation

  • Belke, Ansgar, 2011. "The Euro Area Crisis Management Framework: Consequences for Convergence and Institutional Follow-ups," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 26, pages 672-704.
  • Handle: RePEc:ris:integr:0554
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    More about this item

    Keywords

    EU Governance; European Financial Stability Facility; European Financial Stabilisation Mechanism; European Monetary Fund; Policy Coordination; Stability and Growth Pact;

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements
    • P48 - Economic Systems - - Other Economic Systems - - - Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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