Economic governance in a non-federal EU

The most commonly held belief about the eurozone crisis is that solving it will require greater EU integration. Yet despite all the talk about fundamental design flaws and the need for a federal ‘leap forward’, roadmaps for completing Economic and Monetary Union have been viewed with contempt by national leaders. Neither EU governments or citizens are ready to pool further sovereignty and resources as a way to strengthen the common currency and to improve the EU’s delivering capacity.

As a result, more attention needs to be paid to how the imbalances threatening the stability of the EU and its cohesion objective could be addressed within the existing boundaries of EU treaties. Experience accumulated before and after the eurocrisis has shown that the narrow approach to fiscal and macroeconomic discipline is not enough. Improving the institutions and scope of policy coordination must take priority.

This paper argues that, if member states are serious about convergence, wage and social developments should be included in EU supervision frameworks. Secondly, it analyses the increasingly contractual approach to EU governance and suggests that a stronger sense of reciprocity could arise via smaller scale cooperation of eurozone members and voluntary countries. Ultimately, greater ambition in terms of EU cohesion and democratic legitimacy would require a more substantial rethink of EU governance and policies in the long term.

This paper is a contribution to the ‘WWWforEurope’ project, a four year research initiative led by the Austrian Institute of Economic Research (WIFO) with the objective to identify the conditions for a successful socio-ecological transition in line with the Europe 2020 strategy for smart, sustainable and inclusive growth. The research leading to these results has received funding from the European Commission’s Seventh Framework Programme FP7/2007-2013.

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Website: WWWforEurope project http://www.foreurope.eu/

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