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The New Economic Governance in the EU: Advances and Weaknesses

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  • Moltó Calvo, Miguel
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    The financial and economic crisis and later the debt sovereign crisis have had special effects in the European Monetary Union (EMU). Several countries belonging to the euro zone have been rescued and the euro has passed many troubles. To protect the euro and to tackle to the crisis the Member states of the EMU have followed a double approach. First fiscal consolidation, austerity. Second to improve economic governance. Concerning austerity Member states have reduced public expenses and in many cases have increased taxes. This policy have had a positive effect about budgetary discipline but a very negative effect about growth and employment with the possibility to fall in a new recession in 2012 so three years later the recession of 2009. This situation is not the better to close the gap between the potential growth of the EU and its main competitors countries one of the structural problems of the EU. Concerning the economic governance the article pass in review the existing before the crisis indicating some failures in its implementation. Later is analysed the new framework of economic governance involving the European supervision in three fields, the budgetary, the macroeconomic and the financial. To undertake it new instruments have been created some of them only affecting to the countries of the euro zone. This article shows some weakness of them. The new economic governance is a very important advance but can not resolve the main problems of the EU and more specifically those of the euro zone. There is not any advance in the fiscal union; is not created a rescue mechanism providing with enough funds to deal with the problems may have some big countries like Italy or Spain; the European Central Bank (ECB) is not transformed in the lender at last resort; the creation of a new instrument allowing the mutualisation of public debt in the countries of the euro zone is not considered. The solution for the euro zone is to transfer sovereignty to a Financial Ministry having between other functions the responsibility in the fiscal field and in the macroeconomic and budgetary supervision in all countries and even the issue joint eurobonds.

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    Article provided by University of Santiago de Compostela. Faculty of Economics and Business. in its journal Revista Galega de Economía.

    Volume (Year): 21 (2012)
    Issue (Month): ex ()

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    Handle: RePEc:sdo:regaec:v:21:y:2012:i:ex_2
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