ABSTRACT
Managing the crises affecting Europe’s Economic and Monetary Union (EMU) has been top of the policy agenda for the last five years. EU member states have managed the fallout of the crisis and implemented reforms in emergency mode while at the same time laying the foundations for a more resilient system. Opinions differ on the effectiveness of these reforms in addressing short-term challenges, but, the increasingly urgent question is whether they offer a lasting solution to the well-known shortcomings of the single currency. Here, we argue that EMU reform must result in a more effective form of
integration, capable of assessing and reconciling short-term actions against long-term goals (Nicolaı¨dis 2010). This is very simply a new governing idea
of integration calling for the reconfiguration of the integration process away from the old remedies of ‘deeper and faster’. Instead, EU actors should embed in institutions and procedures a systemic commitment to sustainable integration, defined as something that is durable, resilient and politically acceptable. Such an approach entails both an ethos and practice, a state of mind and benchmarks for decisions by all actors involved in economic and policy action in the EU. It also means changing the way change occurs in the EU and recognizing that intergovernmental bargains need to be sustained by inter-societal and inter-generational bargains. Such an attitude chimes with principles underpinning the internet revolu-
tion, with its emphasis on empowerment, resilience, robustness and adaptive learning. Concretely, the EU should foster a sustainable integration culture and take more account of long-term objectives in managing current problems, thereby creating the preconditions for later action. Sustainable integration is not about policy blueprints but about the negotiation of guidelines for action, linking multiple agenda and actors around a set of shared long-term goals. To make EMU sustainable, the first imperative is to acknowledge that it
had been left incomplete at Maastricht due to divergent Member State preferences (Torres 2009). Expectations that these preferences would converge over time across all member states have been dashed and the consequences exposed by the euro crisis. Before 2008, there was little felt urgency to address the known frailties in EMU’s governance construct (see Giavazzi and Wyplosz, 2015), yet as the crisis unfolded EMU’s very existence was threatened. Major advances in economic governance were subsequently adopted, mainly driven by the short-term imperatives of system survival. The question now is whether they also put EMU on the path to a long-term sustainable future, defined in terms not just of the basics of monetary economics, but also of the viability of the underlying economic model and public support. EMU was set up as a political project in the knowledge that the EU was
not an optimum currency area. Nevertheless, monetary union was achieved rapidly, with the smooth launch of the euro and the transition to the European Central Bank (ECB) for the conduct of monetary policy. By contrast, the economic union side — the ‘E’ in EMU, including provisions for coordination of budgetary and structural policies — was left incomplete. As a result, the many interdependencies between member states of a currency union and higher coordination needs were neglected, while the tentative attempts to enhance coordination processes for economic reform (i.e. the Lisbon Strategy) did little to curb the large negative spillovers from the unfinished economic into the monetary sphere.1Subsequent efforts to complete the economic union part of EMU have gone some way to strengthen EMU’s resilience in the face of market pressures. However, institutional innovation was conditioned by the needs and constraints of the moment: sometimes within and sometimes outside the Community framework; sometimes through variations on intergovernmental cooperation, sometimes by reverting the Community method; sometimes restricted to the Euro area level, sometimes extending to the EU as a whole. The
804 Iain Begg et al.
