Euro Area Macroeconomics, where do we stand twenty years later ?

Résumé 0

For almost 20 years, euro area countries have been sharing a single currency. The drawbacks ofthe euro area framework were highlighted by the widening of imbalances prior to the 2007financial crisis, and thereafter by the huge impact of the financial crisis, the public debt crisis inSouthern countries, and the great recession. Prior to and after the crisis, EU institutions andMember States have not been able to implement either a common economic strategy, orsatisfactory economic policy coordination.This did lead neither to a burst of the euro area, nor to a substantial change in its functioning.Euro area institutions were adapted, through the European Stability Mechanism, the fiscal treaty,the “first semester”, the European Central Bank’s support to MS, the banking union. Theseadaptations were painful.In mid-2018, the economic situation had clearly improved at the euro area level. However, thefollowing question remains unsolved: can the functioning of the euro area be improved,accounting for divergent situations, interests and views in MS?Section 2 recalls proposals from EU institutions and from MS. Section 3 presents and discussesseveral economists’ viewpoints and proposals to improve the euro area policy framework. Someeconomists rely on financial markets to control domestic economic policies, some are in favourof the introduction of a euro zone budget and minister of finance, some are in favour of movingtowards a federal EU with increased democracy, some make original proposals to cut publicdebts, and last some advocate better economic policy coordination.