Overcoming the EU Crisis and Prospects for a Political Union

Paul Welfens

No disbei203, EIIW Discussion paper from Universitätsbibliothek Wuppertal, University Library

Abstract: The euro crisis and a new debate about immigration in Europe have undermined support for the EU. While economic recovery in the euro area and the EU, respectively, is likely to reinforce the backing for EU integration slightly, one should start a broader discussion about sensible reforms in the EU and the euro area; the new agenda should anticipate the Transatlantic Trade and Investment Partnership and help to accelerate the required economic adjustment. As long as no broader consistent EU reform programme has been adopted populist forces could strongly influence the public discussion in Europe and the euro area, respectively. The analysis presented shows the benefits of the euro's reserve currency position, namely in the framework of a neoclassical growth model with seigniorage based on international reserve holding. A reform agenda for the EU and the euro area should focus on avoiding free-rider fiscal behaviour and moral hazard in the euro area and reforms should consist of various elements, including a push for a Euro Political Union. Such a union is the only way to avoid Greek deficit fraud-type problems in the future; the minimum supranational expenditures in Brussels should be close to six percent so that an efficient policy mix in the euro area can be expected and counter-cyclical policy be implemented - with a major welfare gain for people in Europe.

Keywords: European Union; Economic Integration; Growth; Euro Crisis; Political Union (search for similar items in EconPapers)
JEL-codes: F15 G01 O11 O52 (search for similar items in EconPapers)
Pages: 57 Pages
Date: 2014-11
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Related works:
Journal Article: Overcoming the euro crisis and prospects for a political union (2016)
Journal Article: Overcoming the euro crisis and prospects for a political union (2016)
Working Paper: Overcoming the Euro Crisis and Prospects for a Political Union (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:bwu:eiiwdp:disbei203

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