[Il seguente studio è stato redatto da Andrea Noseda per un progetto di Policy design della Scuola di Politiche qualche mese fa, come introduzione a un paper intitolato How to boost EU resilience to future crises. Avendolo ritrovato in un e-mail in questi giorni pensiamo che sia importante pubblicarlo per sfatare alcuni miti che vedono le istituzioni europee immobili ed incapaci di fornire una risposta decisa alla crisi del 2007-2008]
Since the bursting of what Juncker defined as “the worst financial and economic crisis in seven decades”, Europe’s ability to prevent and respond to economic crises has been strongly questioned. It should be enough to notice that the GDP pro-capita in the US had gone back to the pre-crisis level of 2007 within less than five years, while in Europe this only happened after 9 years, in April 2016. The feeling in that Europe was dramatically unprepared and not structured to bear such a disastrous event. Since then, many rules, mechanisms and institutions have been set up in order to be able to prevent and have a prompter and more efficient response to further future crises.
“Economic crisis” is a broad definition for many types of non-desirable currency, income/debt or financial adverse shocks. As such, also the institutions and the tools available to fight those events must be flexible and effective under many circumstances. Over the latest years, European authorities have tried to cope with many of these threats.
If on the one hand the Euro is spread, strong and independent enough not to suffer from big fluctuation and to be protected by its own structure against currency value issues, on the other hand the euro zone is suffering from severe deflationary pressures. Indeed, the European Central Bank’s (ECB) quantitative easing mechanism has the declared aim of boosting investments and inflation at the same time, by increasing the monetary base offered and thus lowering interests’ rates to have a real economic impact.
Moreover, public debt is another big concern for Europe. Since 2009 the global economic uncertainty led to a widespread scepticism on the ability of some European countries to pay back their debt. European authorities adopted both a short-term strategy (in order to guarantee market access for weaker countries) and a long-term strategy (in order to enhance supranational control over the single states’ public spending thus avoiding further scepticism on public debt in the future). The short-term solution was the establishment of the European Financial Stabilisation Mechanism (EFSM) and European Financial Stability Facility (EFSF), two momentary funds with the capacity of lending up to 500 billion Euros to member states at low interest rates. These two funds later gathered (2012) into the stable and permanent European Stability Mechanism (ESM). On the other hand, as a long-term strategy European states signed a new “fiscal compact” which committed them to have every year their budgets approved by the European Commission, with the aim to keep the deficit lower than 0.5% of their GDP. Together with the fiscal compact, European authorities established mechanisms to monitor the macroeconomic decisions of its members in order to avoid both commercial and competitiveness imbalances, prevent speculative bubbles, detect the structural reforms and suggest needed ones.
Financial crises are an additional threat to a European growth and stability. In fact, they are contagious and disastrous for the entire economy and not only for the banking system. Between 2008 and 2011 Europe has allocated 1.6 thousands billion Euros (13% of its GDP) in order to prevent banks’ failures. Moreover, the European Banking Authority (EBA) was established to monitor European banks activity and stress the need of new capitalizations. The European Securities and Market Authority (ESMA) was established to control capital markets and credit rating agencies and the European Insurance and Occupational Pensions Authority (EIOPA) is now in charge of monitoring trends and political risks within the EU member states and to conduct economic analysis of the markets and its possible developments.
In order to go beyond the immediate response to the crisis, several further proposals have been made with the aim of making the European Union more resilient to possible future crises. Most of the proponents agree to recognize a deeper integration as a necessary step and consider the convergence between member states and within European societies a priority. One of the most thorough and authoritative proposals is the one made in the Five Presidents’ report (Juncker, J-C et al., 2015), which aims at completing the Economic and Monetary Union through a two-stage path to be run by 2025. The report focuses on four fronts where progress must happen: Economic, Financial, Fiscal, and Political Union.
As far as the Economic Union is concerned, the main goal identified in the report is a boost to convergence, jobs and growth by exploiting the potential of some policy areas and completing the Single Market. On the Financial Union side, in order to prevent dangerous pressure on the financial system in case of future crises, it is seen as necessary to create a truly single banking system. The report proposes a common deposit insurance scheme (EDIS) to overcome the vulnerability of National insurance schemes and the Capital Market Union to ensure more diversified sources of financing. Deepening the integration of bond and equity markets would also be a tool of shock absorption. With regards to the Fiscal Union, the report identified the creation of a European Fiscal Board as the first step, while in case of severe crisis, in order to strengthen the resilience of the Union, a euro area-wide stabilisation function would be needed. Finally, as a completion of these economic strengthening measures, the report describes proposals in order to reach greater democratic accountability and legitimacy. A deeper involvement of National and European parliaments, a reinforced steer of the Eurogroup with the establishment of a full-time presidency and the achievement of a unified external representation of the EMU are recommended. Also, in a long-run perspective, the report mentions a Euro area treasury with the aim of encouraging a more joint decision-making on fiscal policies.