Europe in the Danger Zone – Consolidating EMU in Times of Unprecedented Challenges

Abstract

After Brexit, EU national leaders can no longer escape the need to implement structural reforms and improve Eurozone governance. Since the start of the crisis, considerable progress has been made to stabilise EMU, but the current status quo is not an adequate answer to the challenges ahead. As in other domains of European interest, lack of initiative and reform is only fuelling populism. The ECB has contributed greatly to making up for the lack of policy coordination, insufficient structural reforms, and lack of progress in Eurozone economic governance. But its policy impact has been limited by these shortcomings and it has frequently been under fire for having had to take extraordinary measures. This paper, first, considers the initial flaws of the monetary project and the progress made since an EMU a minima was launched in 1999. Second, it examines the measures needed to make the long-term functioning of the euro area sustainable, and analyses the range of issues and choices that policymakers and political leaders need to face to stabilize EMU whilst addressing the often structural lack of competitiveness encountered among Eurozone members. Finally, it formulates recommendations on how to improve the workings of EMU without further postponing action.