Report on the State of the European Union : Volume 5: The Euro at 20 and the Futures of Europe

This volume, the fifth instalment of the classic Report on the European Union series, offers at once an economic and intellectual historical perspective on the creation of the euro and its 20 first years, a comprehensive review of the current and future challenges of the euro area, including a critical look at the different options for the reform of its governance and institutional architecture and finally a close look at the “new euros”, i.e. the ambitious projects that could instil a new life into the stalled European project. It covers a wide range of key economic and social topics such as monetary and fiscal policy, tax competition, the EU budget, structural policy, inequality, gender equality, post carbon economy, well-being advancement and democracy. Weakened by a decade of economic crisis and shaken by the awakening of populism, the European project faces three disintegrations: democratic disaffection, monetary and financial fragmentation and territorial dislocation. If EU member states want to escape those looming risks, they must, as they always have in the last five decades, reinvent Europe in order to save it. Contents 5 List of Contributors 8 List of Figures 10 List of Tables 13 1: Introduction: Once More unto the Breaches 14 Part I: Ideas and Achievements 23 2: Ideas That Made the Euro (and Those That Did Not Make It) 24 1 A Kick-Start in 1969 25 2 The Economic and Intellectual Context of the Late 1980s in Europe: The Delors Report 28 3 Rules Rather than Discretion: Ordo-liberalism Plus New Classical Economics 29 4 Optimal Currency Area Theory: Selective, Non-Keynesian Reading 30 5 The Analytical Foundations of the Brussels-Frankfurt Consensus 32 6 The State of Macro Is Not Good 33 References 37 3: The First Twenty Years: Institutions, Policy and Performance 40 1 Introduction 40 2 The Institutional Framework of the Euro Area 41 2.1 The Convergence Criteria 42 2.2 Monetary Policy 44 2.3 Fiscal Policy 45 2.4 An Incomplete and Asymmetric Framework 47 3 The Euro Area Economy: A Brief Assessment 49 4 A New Institutional Setting 53 5 Conclusion 56 References 57 Part II: The Euro at 20 58 4: Single Market and Single Currency: Intended and Unintended Effects 59 1 Higher Mobility, Enhanced Competition 60 2 The Four Freedoms in Practice 61 3 Competitiveness and Non-cooperative National Strategies: From External to Internal Devaluations 65 4 Tax Competition and the Outlook for EU Taxation15 67 5 Concluding Remarks: Social and Ecological Dumping? Can the EU Be More Than a Market? 69 References 73 5: Fiscal Policy: A Useful Tool After All? 75 1 The Rationale and Design for Rules Constraining Macroeconomic Policy 76 2 Fiscal Policy During the Crisis 81 3 The Crisis: The Debate on the Size of Multipliers and the Reassessment of Fiscal Policy 85 4 Conclusion: What Criteria for the Reform of Eurozone Fiscal Governance? 87 References 89 6: Reforming the European Central Bank 92 1 Introduction 92 2 Broadening the Mandate of the ECB 93 3 Clarifying the Border Between Monetary Policy and Public Finances 97 4 Reforming the Decision Process 100 5 Conclusion 103 References 104 7: Real Divergence: How to Fix It? 106 1 Symptoms of Real Divergence Among Nations and Regions 108 2 Underlying Causes of Economic Divergence 110 3 Fiscal Consolidation and Structural Reforms: Curing Evil with Evil? 115 4 The European Investment Plan: Benefitting the Rich? 116 5 The EU Budget, Cohesion and Structural Funds: Past and Future 116 References 121 8: The Future of the Euro Area: The Possible Reforms 123 1 Introduction 123 2 Compliance with the Original Fiscal Framework and Market Discipline 124 2.1 The Fundamental View 124 2.2 Discussion 126 3 Options for Deepening Euro Area Governance 128 4 The European Commission’s Proposals 130 5 What About Macroeconomic Imbalances? 133 6 Conclusion 135 References 137 Part III: Beyond the Euro: The Futures of Europe 139 9: Mitigating the Inequality Crisis 140 1 The Social and Economic Cost of Inequality 141 2 Why Did Income Inequality Rise in Developed Countries? 144 3 Unequal Inequalities in the EU 146 3.1 Within-Country Inequality in the EU 146 3.2 Between-Country Inequality in the European Union: Convergence Limited to the Lowest-Income Countries 150 3.3 Global Inequality in the EU 151 4 The Future of Inequality in the EU: Towards Less Progressive Taxation? 152 5 Conclusion: Keeping Inequalities Low in the EU 154 References 155 10: A Dynamic Towards Gender Equality? Participation and Employment in European Labour Markets 157 1 Gender Gap in the Participation and Gender Regime 159 1.1 The Long-Term Trends in Participation: The Role of Women’s Education 159 1.2 Gender Gap in Participation and the Great Recession 163 2 Employment, Part-Time Job and Gender Wage Gap 166 2.1 The European Employment Strategy: A Decreasing Interest for Gender? 166 2.2 Part-Time Employment and Gender Wage Gap 169 3 Conclusion 172 References 173 11: Building a Consistent European Climate-Energy Policy 176 1 Introduction 176 2 The Multiple Levels of Governance for the Energy Transition 177 3 Bringing More Coherence into European Climate Policies 181 3.1 Policy Priorities Versus Budget Priorities 181 3.2 Strengthening and Harmonizing European Climate-Energy Policy Instruments 183 4 Making Europe the Global Energy Transition Champion 185 4.1 Learning from Past Failures: Solar PV, CFLs and LEDs 185 4.2 Europe’s Industrial Potential 186 5 Conclusion 187 References 189 12: Toward a Well-Being Europe 191 1 Introduction: Governing Numbers 191 2 Embracing the Well-Being and Sustainability Transition 193 3 Building the European Social-Ecological State 198 4 Conclusion: Two Transitions in One 203 References 205 13: A Currency Democratically Shared Among Democracies 207 1 The Two Concepts of Democracy 208 2 The Principle of a Demoicracy 210 3 The Single Currency and Its Deficits in Governance 213 3.1 A Demoicratic Perspective for the Common Currency 214 4 Two Readings of the Incompleteness of the Euro 217 5 Conclusion 219 References 221 14: Conclusion: Where Is the Compass Pointing to? 222 References 225 Index 226 Front Matter ....Pages i-xv Introduction: Once More unto the Breaches (Jérôme Creel, Éloi Laurent, Jacques Le Cacheux)....Pages 1-9 Front Matter ....Pages 11-11 Ideas That Made the Euro (and Those That Did Not Make It) (Jacques Le Cacheux)....Pages 13-28 The First Twenty Years: Institutions, Policy and Performance (Jérôme Creel)....Pages 29-46 Front Matter ....Pages 47-47 Single Market and Single Currency: Intended and Unintended Effects (Jacques Le Cacheux)....Pages 49-64 Fiscal Policy: A Useful Tool After All? (Jérôme Creel, Francesco Saraceno)....Pages 65-81 Reforming the European Central Bank (Christophe Blot, Paul Hubert, Fabien Labondance)....Pages 83-96 Real Divergence: How to Fix It? (Jacques Le Cacheux)....Pages 97-113 The Future of the Euro Area: The Possible Reforms (Jérôme Creel, Francesco Saraceno)....Pages 115-130 Front Matter ....Pages 131-131 Mitigating the Inequality Crisis (Guillaume Allègre)....Pages 133-149 A Dynamic Towards Gender Equality? Participation and Employment in European Labour Markets (Hélène Périvier, Grégory Verdugo)....Pages 151-169 Building a Consistent European Climate-Energy Policy (Aurélien Saussay, Paul Malliet, Gissela Landa Rivera, Frédéric Reynès)....Pages 171-185 Toward a Well-Being Europe (Éloi Laurent)....Pages 187-202 A Currency Democratically Shared Among Democracies (Maxime Parodi)....Pages 203-217 Conclusion: Where Is the Compass Pointing to? (Jérôme Creel, Éloi Laurent, Jacques Le Cacheux)....Pages 219-222 Back Matter ....Pages 223-228 This volume, the fifth instalment of the classic Report on the European Union series, offers at once an economic and intellectual historical perspective on the creation of the euro and its 20 first years, a comprehensive review of the current and future challenges of the euro area, including a critical look at the different options for the reform of its governance and institutional architecture and finally a close look at the znew eurosy, i.e. the ambitious projects that could instil a new life into the stalled European project. It covers a wide range of key economic and social topics such as monetary and fiscal policy, tax competition, the EU budget, structural policy, inequality, gender equality, post carbon economy, well-being advancement and democracy. Weakened by a decade of economic crisis and shaken by the awakening of populism, the European project faces three disintegrations: democratic disaffection, monetary and financial fragmentation and territorial dislocation. If EU member states want to escape those looming risks, they must, as they always have in the last five decades, reinvent Europe in order to save it