The European Union (EU) was just recovering from an unprecedented economic crisis (Global Financial Crisis, Debt and Euro Crisis) when it has been hit by the pandemic and then the Ukrainian war that fueled inflation. Measures have been taken to prevent the spreading of the COVID-virus. These measures were taken at a national level, each member state reacting with its own measures. The economic activity has been stopped. After the pandemic we experienced and strong recovery--the major EU economies have recovered their GDP of before the pandemic--, employment booming, but also inflation. The origins of inflation are multiple. All members states reacted with the same kind of economic package to sustain the economic agents, but at the cost of higher public deficits and debt. The frame of the Maastricht Treaty has exploded. The EU Commission has indebted itself against the rules of the Stability and Growth Pact, with the consent of Germany. We don’t know how the EU economy will look like in a near future. The Commission has learned from its past failures, especially during the €-crisis. But the EU is now at a crossroad. We cannot go back to the orthodox view of public finance. A new step is necessary to complete the European Monetary Union (EMU). It must be achieved with a fiscal Union. The last crises (the €-crisis and the pandemic crisis) have shown the flaws of the European construction: A single currency with a Central Bank need a federal budget to face the next challenges, that are to prevent another debt crisis, to prepare our economies for the climate change, to face the return of protectionist policies, etc. The EU now needs a consolidated economic government.
We will discuss the economic foundations of the European integration. The objective was to consolidate peace among member states. Why did the founding fathers choose an economic path to this goal? What are the political virtues of the economic integration? And why does it need now to be completed with a Fiscal Union?
- Teacher: Patrick Mardellat