Publications

Strengthening the euro area

1 October 2014
Daniela Schwarzer (Director, Europe Program, The German Marshall Fund of the United States (GMF))


Writing about euro governance, Daniela Schwarzer affirms that the main challenge for the EU will be to return the troubled European economies to sustainable private sector-led growth and to fight unemployment. She also addresses the multiple lines of fragmentation the EU is faced with, between the euro area and non-euro area Member States, the one inside the monetary union between the North and the South, the fragmentation within societies, and also the fragmentation of financial markets. A final challenge identified concerns the reduced input and output legitimacy, with countries facing narrower policy options in times of crisis, which in turn has given rise to eurosceptics. Schwarzer argues that a robust economic recovery is necessary to help Europe tackle all these challenges and to help reduce the sovereign debt burden. Any promising path to economic recovery will have to combine measures that ensure accessible and cheap credit, structural reforms that release growth potential both in deficit and surplus countries, investment in education and mobility, and finally a better macroeconomic policy mix. In the long run, the author argues, it is unlikely that economic prosperity can be achieved without improving the decision-making mechanisms of the euro area.

Strengthening the euro area