IDEAS home Printed from https://ideas.repec.org/p/coe/wpbeep/34.html
   My bibliography  Save this paper

Designing a Genuine EMU: Which “Unions” for EU and Eurozone?

Author

Listed:
  • Jacques Pelkmans

    (Senior Research Fellow, CEPS (Brussels); Visiting Professor, College of Europe (Bruges))

Abstract

The initial ‘framing’ (in the summer of 2012) of the ‘genuine EMU’ for the wider public suggested to design an entire series of ‘unions’. So many ‘unions’ are neither necessary nor desirable – only some are and their design matters. The paper critically discusses first the negative fall-out of the crisis for EMU, and subsequently assesses the fiscal and the banking unions as accomplished so far, without going into highly specific technical details. The assessment is moderately positive, although there is ample scope for further improvement and a risk for short-term turbulence once the ECB has finished its tests and reviews. What about the parade of other ’unions’ such as economic union, social union and political union? The macro-economic imbalances procedure (MIP) and possibly the ESRB have overcome the pre-crisis disregard of macro competitiveness. The three components of ‘economic union’ (single market, economic policy coordination and budgetary disciplines) have all been strengthened. The last two ‘unions’, on the other hand, would imply a fundamental change in the conferral of powers to the EU/ Eurozone, with drastic and possibly very serious long-run implications, including a break-up of the Union, if such proposals would be pushed through. The cure is worse than the disease. Whereas social union is perhaps easier to dismiss as a ‘misfit’ in the EU, the recent popularity of suggesting a ‘political union’ is seen as worrisome. Probably, nobody knows what a ‘political union’ is, or, at best, it is a highly elastic notion: it might be thought necessary for reasons of domestic economic reforms in EU countries, for a larger common budget, for some EU tax power, for (greater) risk pooling, for ‘symmetric’ macro-economic adjustment and for some ultimate control of the ECB in times of crisis. Taking each one of these arguments separately, a range of more typical EU solutions might be found without suggesting a ‘political union’. Just as ‘fiscal capacity’ was long an all-or-nothing taboo for shifting bank resolution to the EU level, now solved with a modest common Fund and carefully confined but centralised powers, the author suggests that other carefully targeted responses can be designed for the various aspects where seen as indispensable, including the political say of a lender-of-last-resort function of the ECB. Hence, neither a social nor a political union worthy of the name ought to be pursued. Yet, political legitimacy matters, both with national parliaments and the grassroots. National parliaments will have to play a larger role.

Suggested Citation

  • Jacques Pelkmans, 2014. "Designing a Genuine EMU: Which “Unions” for EU and Eurozone?," Bruges European Economic Policy Briefings 34, European Economic Studies Department, College of Europe.
  • Handle: RePEc:coe:wpbeep:34
    as

    Download full text from publisher

    File URL: https://www.coleurope.eu/system/files_force/research-paper/beep_34__final.pdf?download=1
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. André Sapir & Guntram B. Wolff, 2013. "The neglected side of banking union- reshaping Europe’s financial system," Policy Contributions 792, Bruegel.
    2. Acharya, Viral V. & Steffen, Sascha, 2014. "Falling short of expectations? Stress-testing the European banking system," CEPS Papers 8803, Centre for European Policy Studies.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Maria Demertzis & Silvia Merler & Guntram B Wolff, 2018. "Capital Markets Union and the Fintech Opportunity," JThe Journal of Financial Regulation, Oxford University Press, vol. 4(1), pages 157-165.
    2. Ms. Enrica Detragiache & Mr. Thierry Tressel & Ms. Rima A Turk, 2018. "Where Have All the Profits Gone? European Bank Profitability Over the Financial Cycle," IMF Working Papers 2018/099, International Monetary Fund.
    3. Christopher Gandrud & Mark Hallerberg, 2015. "Does Banking Union Worsen the EU's Democratic Deficit? The Need for Greater Supervisory Data Transparency," Journal of Common Market Studies, Wiley Blackwell, vol. 53(4), pages 769-785, July.
    4. Jorg Bibow, 2015. "The Euro's Savior? Assessing the ECB's Crisis Management Performance and Potential for Crisis Resolution," Economics Working Paper Archive wp_845, Levy Economics Institute.
    5. Maylis Avaro & Henri Sterdyniak, 2014. "Banking union: a solution to the euro zone crisis?," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(1), pages 193-241.
    6. Bonczek, Thomas & Fuest, Clemens & Schröder, Michael, 2014. "Who is afraid of the Asset Quality Review? Potential losses and capital shortfalls in the European banking system," Frankfurt School - Working Paper Series 213, Frankfurt School of Finance and Management.
    7. Schularick, Moritz & Steffen, Sascha & Tröger, Tobias, 2020. "Bank capital and the European recovery from the COVID-19 crisis," CEPR Discussion Papers 14927, C.E.P.R. Discussion Papers.
    8. repec:zbw:bofrdp:2016_012 is not listed on IDEAS
    9. Haavio, Markus & Ripatti, Antti & Takalo, Tuomas, 2016. "Saving Wall Street or main street," Bank of Finland Research Discussion Papers 12/2016, Bank of Finland.
    10. Sahin, Cenkhan & de Haan, Jakob, 2016. "Market reactions to the ECB’s Comprehensive Assessment," Economics Letters, Elsevier, vol. 140(C), pages 1-5.
    11. Jondeau, Eric & Sahuc, Jean-Guillaume, 2022. "Bank capital shortfall in the euro area," Journal of Financial Stability, Elsevier, vol. 62(C).
    12. Marina Brogi & Valentina Lagasio & Luca Riccetti, 2021. "Systemic risk measurement: bucketing global systemically important banks," Annals of Finance, Springer, vol. 17(3), pages 319-351, September.
    13. Guillaume Arnould & Salim Dehmej, 2016. "Is the European banking system robust? An evaluation through the lens of the ECB?s Comprehensive Assessment," International Economics, CEPII research center, issue 147, pages 126-144.
    14. Breckenfelder, Johannes & Ivashina, Victoria, 2021. "Bank balance sheet constraints and bond liquidity," Working Paper Series 2589, European Central Bank.
    15. D. Georgoutsos & G. Moratis, 2021. "On the informative value of the EU-wide stress tests and the determinants of banks’ stock return reactions," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 48(4), pages 977-1008, November.
    16. Haavio, Markus & Ripatti, Antti & Takalo, Tuomas, 2016. "Saving Wall Street or main street," Research Discussion Papers 12/2016, Bank of Finland.
    17. Eric Jondeau & Jean-Guillaume Sahuc, 2018. "A General Equilibrium Appraisal of Capital Shortfall," Swiss Finance Institute Research Paper Series 18-12, Swiss Finance Institute, revised Feb 2018.
    18. Berg, Tobias & Kaserer, Christoph, 2015. "Does contingent capital induce excessive risk-taking?," Journal of Financial Intermediation, Elsevier, vol. 24(3), pages 356-385.
    19. Curi, Claudia & Lozano-Vivas, Ana, 2020. "Managerial ability as a tool for prudential regulation," Journal of Economic Behavior & Organization, Elsevier, vol. 174(C), pages 87-107.
    20. repec:hal:spmain:info:hdl:2441/144pedpca18ff8v7fh3tvnp99m is not listed on IDEAS
    21. Guillaume Arnould & Salim Dehmej, 2015. "Is the European banking system more robust? An evaluation through the lens of the ECB's Comprehensive Assessment," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01222489, HAL.
    22. P. Butzen & S. Cheliout & H. Geeroms, 2014. "Lessons from the US for the institutional design of EMU," Economic Review, National Bank of Belgium, issue ii, pages 82-101, September.

    More about this item

    Keywords

    Economic and Monetary Union; Banking Union; Political Union; Financial Crisis;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • N24 - Economic History - - Financial Markets and Institutions - - - Europe: 1913-

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:coe:wpbeep:34. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jessie Moerman (email available below). General contact details of provider: https://edirc.repec.org/data/eescebe.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.