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The Euro Crisis and Its Aftermath$
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Jean Pisani-Ferry

Print publication date: 2014

Print ISBN-13: 9780199993338

Published to Oxford Scholarship Online: May 2014

DOI: 10.1093/acprof:oso/9780199993338.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (oxford.universitypressscholarship.com). (c) Copyright Oxford University Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 10 May 2021

Governance Reform

Governance Reform

(p.165) Chapter 20 Governance Reform
The Euro Crisis and Its Aftermath

Jean Pisani-Ferry

Oxford University Press

The euro area is equipped with a series of partial powers, rather than a government. The economic challenges facing Europe during the crisis were significant, but they were repeatedly magnified by Europe’s inability to anticipate them, by its penchant for procrastination, its taste for fragile compromises and its propensity to reopen discussions after they had been settled. It would be wrong, however, to regard the executive deficit as a behavioral rather than an institutional problem. The Maastricht Treaty established a euro area that was not designed to cope with crises. Governance by rules and procedures can work fine in fair-weather conditions, but cannot be relied on in stormy weather. What is expected from policymakers during crises is an ability to go beyond the script and to exercise discretionary power. At first sight, it may seem that the solution would be for Europe to adopt the federal model and create a stronger center that is capable of taking initiatives and making decisions. However, in designing the response to the crisis and creating the EFSF and the ESM, the euro area did just the opposite by embracing the model of mutual assistance. This choice arose from legal constraints and a political objective, but suffers from severe shortcomings. In the long-run, the federal model would be the most fitting solution and the most consistent with the history of the European Union. However, for the foreseeable future, Europe seemed condemned to experiment with politically acceptable but systematically inferior solutions.

Keywords:   euro, European Central Bank, Europe, governance, euro crisis, Maastricht Treaty, monetary union, reform, mutual assistance, federalism, Eurogroup

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