Brussels Economic Forum 2008
Economic and Monetary Union: 10 years on
The Forum was divided into three sessions. Session 1 assessed growth and employment in Europe after a decade of EMU, looking at policies, the euro in global financial markets, and whether it has lived up to its expectations. Session 2 considered how well the euro has weathered storms, and is doing so today, in the international environment. The final session looked to the future and asked how the full potential of EMU and the euro can be unlocked to give stronger growth.
“Every reason to be proud”
The EU Commissioner for Economic and Monetary Affairs Joaquín Almunia started his opening address by underlining the special significance of this year’s conference which coincides with the tenth anniversary of Economic and Monetary Union and the launch of the euro in May 1998.
He then went on to outline the main achievements of what he described as a “crucial stepping stone to ever closer union”. From day one, he told the audience, EMU created a zone of macroeconomic stability and put an end to traumatising exchange rate realignments, noting that without the euro today, the present turmoil in financial markets would be placing enormous strains on euro-area economies with serious consequences for trade and investment. “We ought to recall this simple fact, for those who forget our past monetary turbulences,” he reminded listeners.
Looking at the successes of EMU and the euro, he pointed to the improving fiscal situation, particularly since the reform of the SGP in 2005, and noted that, if the Council follows the recent Commission recommendations on Italy and Portugal, for the first time since 2002 no euro-area country will be in the excessive deficit procedure – the majority are either in surplus or have balanced budgets!
“And last but not least”, explained Joaquín Almunia, “citizens have been among the first to benefit from EMU’s achievements. Price stability has shielded more vulnerable groups from abrupt loss of purchasing power.” He also pointed to the combination of enhanced stability, deeper integration and reforms that have had such a striking impact on the labour market, creating 16 million jobs over the last decade, which is substantially more than in previous decades.
Looking ahead, the Commissioner warned that, while EMU has left the Union stronger, not all is positive. Economic growth is too low in some Member States, productivity growth is much lower than expected and there are persistent divergences between Member States of the euro area which pose risks for the ability of the bloc as a whole to adjust to economic shocks.
Employment rate by country
To address these and other challenges, the Commissioner proposed a three-pillar agenda for the future. The first ‘domestic pillar’ involves reinforced – broader and deeper – coordination and surveillance to quickly identify growing risks arising from imbalances and instability. The second pillar concerns developing a clear international strategy. The increasing role of the euro in international markets demands this. A global currency runs global risks so it is vital that the voice of the euro area is heard clearly in international fora. Moving to the third and final pillar, the Commissioner spoke on euro-area governance. Closer coordination between ECOFIN and the Eurogroup in particular will become more important as the euro area enlarges.
Concluding, the Commissioner praised the decision of ten years ago to give the green light to EMU. “We are reaping the rewards of that truly bold decision,” he said. “The euro is a huge success and we have every reason to be proud of our single currency.”