The current eurozone crisis and, specifically, the depth and duration of the economic recession in some euro member states, has created the necessity to debate whether the original design of the euro was fundamentally flawed and, if so, what can be done to improve the governance of EMU. Another, important question which has emerged is the extent to which the design of the European Central Bank – which put a premium on independence from political pressures – has been vindicated by the performance of this institution in view of the crisis.

In this context, the seminar “Redesigning EMU governance in light of the eurozone crisis”, organised last November 21 by CIDOB, proposed the holding of two round tables focused on the analysis of the Euro’s design failures, how to address them and the extent to which monetary integration in Europe tends to increase the democratic deficit and what can be done about it.

Miquel Nadal, member of CIDOB’s board, introduced the seminar by saying that tensions in Europe could reappear sooner or later as “the storm” may come back. Moreover, he pointed out that citizens are not noticing the benefits of the economic recovery, which implies a huge social and political risk as there is a limit for what citizens can withstand. Regarding the EU, the crisis has already shown the limits of the integration process. Right now, the Union knows where it wants to go but is not sure how to get there and it surely cannot stay where it is.

The president of ELIAMEP, Loukas Tsoukalis, was the keynote speaker of the seminar and focused on presenting the current situation. In his words, since the II World War, this has been the worst economic crisis. As he puts forward in his book The Unhappy State of the Union: Europe Needs a New Grand Bargain, “the crisis in Europe manifests itself in many different ways, with economies languishing, some indeed imploding, anti-systemic parties on the rise, a growing disconnect between politics and society, and support for European integration reaching an historical low. All this is coupled with growing fragmentation between and within countries”.

By the end of 2015, taking into account the stratospheric rates of youth unemployment, the crisis will have cost not only a lost decade but also a lost generation. In this sense, Europe’s conservative agenda today cannot provide an adequate response. Unless it changes, anti-systemic parties and protest movements that challenge the status quo will continue to have a field day, nationalism and populism as well.

Tsoukalis also argued that the permissive consensus on which the European project had rested for several decades can no longer be taken for granted. During the crisis, Europe has been divided between creditors and debtors, between euro countries and the rest. In his view, what still keeps Europe together is the political glue that has solidified through several decades of close cooperation and, even more important, the fear of the alternative. Although there is a dramatic decline of the support to the integration process, it is not affecting the support to the euro.

Last but not least, Tsoukalis referred to the systemic crisis of the Eurozone and the growing disconnect between political elites and society. If Europe continues with the muddling through, it will remain weak, internally divided and inward looking.

During the first round table, Design failures and what should and can be done about them, Elena Flores, Director for Policy Strategy and Coordination at the DG of Economic and Financial Affairs (European Commission), started her presentation pointing out what went wrong from the beginning of the crisis. On the first place, she exposed market and policy failures in pre-crisis years, such as the build-up of large macroeconomic imbalances, the insufficient fiscal consolidation in good times and the lack of structural reforms to cope with asymmetric shocks. Also, she highlighted the excessive risk accumulation during good times in both public and private sectors, which led to a failing market discipline and insufficient monitoring and enforcement tools.

In her view, the current challenges nowadays are the investment gap, low inflation, unemployment and heterogeneity. In addition, both supply and demand should be addressed through monetary policy, the composition of public expenditure, the EU’s investment package, structural reforms and responsible public finances.

Then, Federico Steinberg, Research Fellow at Elcano Royal Institute, noted the main weakness in architecture was the inconsistency between a single monetary policy and decentralised responsibility for other critical areas of macro- economic and financial policy making. To him, in order to really fix the euro, the Banking Union should be completed -including a real common fiscal backstop and a common insurance deposit scheme- and the ECB mandate, revised. Other measures to be taken into account should include enhancing risk sharing mechanisms and economic policy coordination; strengthen further the ESM; improve coordination and institutional dialogue between monetary, fiscal and structural policies; Treaty reform; unifying external representation of EMU or creating a head of the fiscal authority, responsible for coordination and international voice of the Euro.

Steinberg concluded his presentation by claiming the need for a shared vision for the Euro Area and pointing out the main political and economic challenges that Europe is facing right now, that is, on the one hand, public opinion and need to revive the Franco-German axis, and, on the other hand, secular stagnation, deflation and excessively high government.

The first remark by Cinzia Alcidi, Head of the Economic Unit al CEPS, was related to the European Commission priorities on economic governance: “The crisis exposed fundamental problems and unsustainable trends in many European countries. It also made clear just how interdependent the EU's economies are. Greater economic policy coordination across the EU will help us to address these problems and boost growth and job creation in future”.

In her view, the major threats to the stability of the EMU come from the fiscal side although the external position of a country matters a lot in times of crisis, not only its fiscal position. When it comes to the system of rules, Alcidi believes that rules dealing with crisis can pose problems of legitimacy and, often, applying them is politically difficult. Yet, rules remain the fundamental pillar of the system and questioning them means questioning the EMU, even if the perception that Brussels knows what is best is harder to accept if there is no delivery, no output legitimacy.

The second round table, Technocratic governance versus political accountability, started with the key requests for the EU posed by Ulrike Guérot, Senior Associate from OSIFE,related to the redesign of the European parliamentarism, the right of initiative for the EP or the possibility of a bicameralism. According to her, we should move out of “more/less” Europe and stop playing national Parliaments vs. European Parliament. Today, the key issue is no longer integration but democracy, as well as it is not about solidarity but equality.

In that sense, the European discourse line should be constructed not along countries but on a transnational distribution top-down. The good news is that the cultural basis for transnational European democracy among citizens is there and that the access to same social rights is widely accepted on the basis of common citizenship.

Afterwards, Fabian Zuleeg, Chief Executive at EPC, stated that people don’t see institutions as legitimate anymore and that there is an evident lack of trust between member states. Assuming that EU is not a government, Europe needs to reinforce its democratic legitimacy and needs to do more to communicate better. As possible solutions, Zuleeg proposed two options: the Troika method (giving power to someone else) or the community method (that only works with clear targets and goals and where flexibility is more difficult). In Zuleeg’s words, “the EU we are creating is a Eurozone Union: those countries that won’t commit to the Euro will be out”.

In order to close the second and last round table of the seminar, Yves Bertoncini, Director of Notre Europe – Jacques Delors Institute, remarked the loss of sovereignty that currently exists the facto in the EU. He suggested that, at an executive level, the EU should be able to put faces to its power. Once we have realized that the EU was not experienced enough to face the crisis, we should be able to move forward, being able to rely on MEPs and aware that this is not only about technocratic government.