Europe

My final column written as ZEW's President before resiging from office has to do with Europe. Not only to pay tribute to the "E" in ZEW, but primarily because I am worried about Europe. We should not let things continue as they are at present. Indeed, we must counter the prevailing sense of disappointment about institutional arrangements, both at the EU and national level. At the same time, we must resist succumbing to exaggerated hopes, let alone fantasies.

The prevailing sense of disgruntlement only has the appearance of incompatibility with the recent awarding of the Nobel Peace Prize to the EU. The acceptance speeches by the leading representatives of the EU, Barroso and van Rompuy, mainly acknowledged the achievements of the EU's founding fathers and the architects of unification - that is, of the "first generation", if you will. But does this mean, like in Buddenbrooks, that we are now on the threshold of the third generation? And that this generation is going to let the magnificent work of the past fall to pieces?

We cannot simply ignore this danger. When one thinks about the EU Commission these days, the first thing that frequently comes to mind is bureaucracy and legislative haggling. This impression is founded on the Commission’s passion for minute over-regulation as well as the endless speculation in the media and by politicians as to who were the winners and losers of important meetings. Naturally, it is legitimate to promote the interests of one’s own country, but not at any price and surely not in keeping with Margaret Thatcher’s motto, "I want my money back". Politicians who act in this way have no right to complain about Europe fatigue!

An additional factor contributing to EU-discontent is widespread and reciprocal suspicion of being bamboozled by other governments, a concern amply demonstrated by debates over the monetary union. Indeed, the agreements underlying the union have frequently been broken and the Stability and Growth Pact was decisively weakened in 2003 - yet at the doing of Germany and France, it should be noted. Yet we have learned lessons from these bad experiences and have agreed to a series of rules backed by sanctions. For all the justifiable scepticism about their viability – anyone who proceeds from the assumption that we are simply dealing with a bunch of scoundrel states that work on the principle of breaking treaties cannot possibly afford to engage himself with an EU, or a Monetary Union, or a NATO.

At the opposite extreme from EU-disgruntlement are visions that are remote from reality, such as reveries about the United States of Europe. While I have nothing against "I have a dream" (in the spirit of Martin Luther King), I am not so sure how parliaments in Berlin, Paris, and Rome would respond if a European Minister of Finance issued instructions to them. No more am I persuaded that the United States of Europe would ultimately be a particularly desirable goal. Large economic zones have had to face economic growth cycles just as small ones have. And was it despite or because of its compartmentalization that Europe experienced a period of such extraordinary economic expansion after the Second World War?

One principle that needs to be quite generally applied is this: one must locate accountability and supervision at the same level. With respect to fiscal policy, this means preserving national budgetary autonomy, but with stricter adherence to the regulatory system agreed to at the European level - for example, with respect to limits on sovereign debt. With respect to stabilizing the private banking system, the situation is somewhat different. Here, we need European banking oversight and a European agency for restructuring and liquidating banks. Thus, it is not a question of regulating all issues either at the European or the national level; rather, the regulating body should be determined by specific issue at hand. On the whole, we are making progress in developing a sustainable regulatory framework, all the criticism about the details notwithstanding. This leaves me, despite all the worries, to conclude on a hopeful note.