The decision, taken during the intergovernmental conference (IGC) held in Maastricht in 1991, to introduce a common currency for the member states of the European Union (EU) represented a turning point in the process of European integration. However, that decision was framed within a structure of compromises that allowed, first, few member states to opt-out of the new common currency's regime (or Economic and Monetary Union, EMU) and, second, to institutionalize within EMU an intergovernmental setting for the control of economic policy and a supranational setting for the control of monetary policy. A Eurozone was created distinct from a non-euro area and thus organized according to a decision-making model combining centralization of monetary policy and decentralization of economic, financial and fiscal policies. Those decentralized policies should however be coordinated within and by the intergovernmental institutions of the European Council (of the heads of state or government) and the ECOFIN Council (of ministers of financial and economic affairs). The euro crisis, that started to hit Europe in 2008, has called into question the compromise both between the two member state areas and between a centralized monetary policy and decentralized economic policy. Indeed, the financial crisis has become a political crisis of the EMU but also of the EU as institutionalized by the Lisbon Treaty (on the Lisbon Treaty, see Craig 2010 and Piris 2010). My research question is thus the following: why has that happened? The article will argue that the political implications of the euro crisis are due to a wrong institutional design of the Eurozone's model of economic governance.
The evolution of the European Union (EU), from the 1951 Paris Treaty and 1957 Rome Treaties to the 2009 Lisbon Treaty, was characterized by a panoply of compromises in order to accommodate different needs and perspectives on integration, on the assumption that they would not become mutually incompatible. In particular, from Maastricht to Lisbon, the EU developed as an internally differentiated political system (Leuffen, Rittberger and Schimmelfennig, 2013; Dyson and Sepos 2010), able to accommodate member states with different views on the finality of the integration process and different speeds in pursuing it (Blockmans 2014; Piris 2012; Schmidt 2010). With the approval of the Lisbon Treaty, it was generally thought that those constitutional compromises would finally be consolidated (Kral 2008). However, with the explosion of the euro crisis, shortly before the entering into force of the Lisbon Treaty, the structure of constitutional compromises institutionalized by and in the Lisbon Treaty has been dramatically upset. First, through the formation of an institutional and legal order for the Eurozone, distinct from and outside the Lisbon Treaty. Under the impact of the crisis, and in order to neutralize its effects, unprecedented measure were introduced through the procedures established by the Lisbon Treaty, but a number of EU member states have also approved new intergovernmental treaties (the European Stability Mechanism or ESM, the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union, the so-called Fiscal Compact and, last but not least, the Single Resolution Fund or SRF in the context of the banking union) outside of the Lisbon Treaty, besides executive agreements (as the European Financial Stability Facility or EFSF and the Euro Plus Pact), binding of course only the signatory member states. But, second, the entire model of economic governance of EMU has shown dramatic pitfalls. Under the impact of the euro crisis (Fossum and Menendez 2014), the EMU has made evident the institutional deficit of its governance's model. In order to justify my argument I will proceed as follows: in section 2, I will reconstruct the model of economic governance of the Eurozone; in section 3, I will analyze the consequences of the euro crisis on that model; in section 4, I will identify the features of a new governance model for the EMU that would imply an institutional differentiation from the no euro-area member states; finally, in section 5, I will draw the main conclusion from the analysis.
The Economic Governance of the Eurozone
The IGC held in Maastricht in 1991 had several dramatic challenges to face. One, if not the most important of them, had to do with German reunification which took place the year before. After having accepted the re-unification of Germany in 1990 and in order to keep the reunified Germany within a tighter framework, the 1992 Maastricht Treaty set the criteria for launching the Economic and Monetary Union or EMU as the policies' framework for supporting the project of a single currency (Jabko 2006). Certainly the project of the single currency was not thrown together in the aftermath of German reunification (Issing 2008). Indeed, it was largely defined by a 1988 ad hoc committee, chaired by the then president of the Commission Jacques Delors and constituted by the governors of the central banks of the then twelve member states. Already in the 1970s, after the collapse of the Bretton Woods currencies exchange system, projects and experiments for promoting a European monetary system were advanced and discussed. And certainly the approval of the Single European Act in 1986, which created the conditions for moving from a common to a single market, instituted a powerful trigger for rationalizing the then operating European Monetary System. However, the Delors Report, made public in 1989, seemed to offer also a political solution for the German question. Germany, in fact, was asked to give up the symbol of its own post-war economic resurgence, the Deutsche mark, in order to be allowed to achieve the political end of that resurgence.
The Maastricht Treaty set out a plan to introduce the EMU in three stages. On 1 January 1994, a European Monetary Institute was established as the forerunner of a new banking institution for controlling monetary policy. On 1 June 1998, this new institution, the European Central Bank (ECB), was created, tailored on the model of the Deutsche Bundesbank. On 31 December 1998, the conversion rates between the eleven participating national currencies and the euro were established. On 1 January 2002, euro notes and coins began to circulate. But EMU, and more in general the single currency's project, was not accepted by all the then EU member states (Dyson and Quaglia 2010). Thus, it was necessary to find a compromise with those countries, the United Kingdom (UK) and Denmark, that did not agree with it. The UK and Denmark were allowed to formally opt-out of the obligation to convert their national currencies into the new common currency, regardless of their macroeconomic conditions. De facto, a third member state, Sweden, has been allowed to keep its own national currency, thanks to a biased algebraic calculation regularly showing its inability to fulfill the required macro-economic criteria. The three countries contributed with others in the 1960s to develop a project of economic cooperation, the European Free Trade Association (EFTA), (1) which was in turn heir to the Free Trade Area (FTA), the alternative project to the one begun with the 1951 Paris Treaty and the 1957 Rome Treaties. For the opt-out member states, European integration was a process to create and preserve a market regime, not an economic and monetary union. These opt-outs were preserved by the 2009 Lisbon Treaty, notwithstanding what it (TEU, Art. 3.4) re-asserted, namely that "the Union shall establish an economic and monetary union whose currency is the euro. Thus, different economic and monetary regimes came to coexist in the same project of integration. Within the EMU, there were the regimes of the euro-area member states (the 'ins') and the regimes of those member states not yet fulfilling the macro-economic criteria but engaged in meeting them (the 'pre-ins'). Outside the EMU, the monetary and economic regime of the member states self-excluded from the common currency (the 'outs')."
The pitfalls of the Eurozone's model of economic governance.
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