Carsten Brzeski, Chief Economist at ING, suggests that the recent Eurogroup decision cab ne labelled as ‘too little, too late’, ‘lacking ambitions’, ‘baby steps’ or the famous ‘kicking the can down the road’ as the result of more than another year of endless and cumbersome negotiations is a meagre shadow of original ambitions, voiced by numberless reports of many presidents, experts and also French President Emmanuel Macron.
Key Quotes
“The list of “unfinished business” is clearly longer than the list of achievements. Nevertheless, let’s not forget that compared with ten years ago, the Eurozone’s institutional set-up is now much more crisis-resistant. Who, back then, could have imagined a Eurozone bailout fund, a single European Bank Supervisor, a Single Bank Resolution Fund with a financial backstop, the ECB as a lender of last resort and somewhat closer policy coordination and stricter control by the European Commission? Against this background, last night’s decisions were indeed again a small step into the right direction.”
“Nevertheless, the current set-up remains suboptimal as it does not entirely eliminate a subliminal break-up risk and therefore does not exploit the full economic benefits of a monetary union.”
“In our view, to make the Eurozone fully-sustainable, there should be a fully-functioning and integrated Eurozone capital and financial market, which indeed would require a European bank deposit insurance scheme and better instruments for macro stabilisation. As regards the latter, one can think of a Eurozone budget or more flexible fiscal rules but also of common tax or social security systems. In short, more economic risk sharing without necessarily creating new permanent transfers.”
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