Do European leaders have a vision?

Hmm…

Questions:

1. We see a lot of discussions about the future of the EU. It seems that the core of the discussion is that we need some changes. But would you say that the European leaders really have a vision how to change the EU?

2. What would be your advice to politicians how to change Europe?

Answers:

Erik JonesProfessor of European Studies, Director, Bologna Institute for Policy Research, Paul H. Nitze School of Advanced International Studies (SAIS), Bologna Center, The Johns Hopkins University

1. I think the European leaders have two different visions. One is very functional. Four of the five ECB Board members gave speeches at the end of the last week to advocate the move toward a banking union that would consist of a common deposit insurance program, a common banking resolution facility, and a common framework for prudential oversight. The purpose of this union is to stabilize financial markets and to prevent a catastrophic bank run. It has no higher ambition and it is likely to feature prominently in the ‘new vision for the euro area’ that Mario Draghi will propose together with Herman van Rompuy, Jean-Claude Juncker, and Jose-Manuel Barroso. The other vision is much more political. That is the one being urged by Angela Merkel and by Jörg Asmussen. It involves an ambitious plan to combine representation at the European level in order to legitimate transfers across countries. I think the functional vision is easier to implement but the Germans argue that it will not be stable without the more ambitious political union to back it up. I expect the European Council summit will be dominated by the debate between and around these positions.

2. My advice would be to go for the more functional or practical arrangement and to place more efforts on selling that to domestic audiences in Germany and elsewhere. No doubt it will be a hard sell. But this is the only realistic prospect for acting in a timely manner. Indeed, if we could show some progress toward a banking union we might even provide sufficient cover for the ECB to intervene again the markets by announcing another LTRO or restarting the SMP. In a fantasy universe, the ECB could set a floor on bond prices without worrying that it had no exit strategy. But that clearly is not going to happen. My main concern is to avoid a protracted argument about political union that will only create more time for mistakes or misunderstandings to reshape the European agenda.

Vihar Georgiev, PhD student, European Studies Department, Sofia University St. Kliment Ohridski

1. No, they don’t. Currently all European politicians are stretched between their respective national interests and the overall survival of the European Union. However, they are not openly discussing all necessary elements of a comprehensive strategy for resolving the eurozone crisis. Instead, they overexpose certain issues (austerity, bank supervision, financial transaction tax, etc.), while keeping other issues under the rug (the trade balance).

2. Today countries like Germany and Netherlands are producing too much and spending too little. Northern Member States must start spending, boosting their internal demand. Southern Member States should strive for balanced budgets, but only after a comprehensive analysis of their long-term budgetary sustainability. The devil is in the details: too much austerity will kill the European economy; too much spending may lead to excessive inflation. In any case the German fear of hyperinflation is premature and counterproductive.

The real underlying issue, however, is demography. We need to focus on finding long-term solutions for attracting young, talented people. At the same time we need to secure our borders and stabilize our neighbourhood (especially in the Mediterranean and the Middle East).

Cristian GhineaDirector, Romanian Center for European Policies

After overspending for so many years, the (social) Europe lives the end of the dream. The end of `the European dream` as Jeremy Rifkin called his over optimistic and over simplistic book. I don`t blame only the politicians for this, the voters also voted for years politicians that promised them increased public spending. So, the voters created the incentives for bad policy decisions.

Now, the dream is over. The political elite tried to implement the rational choice: austerity. But the same voters that previously created incentives for overspending, now they are not willing to accept the end of the dream. The austerity creates frustration and votes against `the system`. Thus, the politicians have to adapt in Darwinian conditions: give the voters what they want or you`ll be extinct (as Sarkozy). So, the politicians have to be seen as doing something.

Another Europe is a slogan, is a signal: look, people, we are doing something. It`s not clear what and for what purpose, but at least, we are doing SOMETHING.

I would not bet on significant changes in crises. After, the crises, yes. The same political elite will sit down and think and come up with a solution not to repeat this crises. But for the time being, it`s just political rhetoric.

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