Economic Foundations of the EU

The European Union’s economy (EU) is under permanent pressure since the beginning of the 21st C. After the launch of the € the EU had to face the Global Financial Crisis from the Subprime Crisis, followed by the € and debt Crisis, the COVID crisis and Russian war on Ukraine, plus the Iran war threatening the stability of the eurozone. New crises arise even before the previous one has been resolved. We are thus entering a world of ‘polycrisis’, to use Adam Tooze’s term. The economic structure of the European Union and the EU’s economic policies have changed and evolved in response to these crises. However, the EU’s economic principles remain unchanged in its legal texts and Treaties, preventing the EU from positioning itself as a genuine economic player on the international stage, particularly in a world witnessing a rise in nationalism and economic self-interest. The EU appears to be the last economic bloc still driven by the ideals of economic liberalism.

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 needs 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?