An Index of EU Institutional Integration

The financial crisis that started in 2007 and spread across several advanced economies of the world also exposed weaknesses in the architecture of European Economic and Monetary Union (EMU). Several examples point to these weaknesses in the financial, fiscal and economic policy domains. In response to the crisis, the institutional adaptation that has taken place in the EU and euro area may have been remarkable by historical standards both in terms of scope and timing. Moreover, the thinking of policy makers about the future development of EMU has been forthcoming and has provided insights as to what might be a new “steady state” of European integration at least in the policy areas relating to EMU. Against this background, we develop a quantitative index that measures the path of institutional integration in Europe since the 1950s. We take two reference points for the index, one backward and one forward looking. As regards the backward looking component, we look at the period between 1957 and 1994 and the institutional steps taken during what we call the “internal market era”. As for the forward looking component, we base ourselves on the steps taken since the implementation of EMU after Maastricht (Union era) and extrapolate on the basis of the insights provided most recently by the four Presidents’ report on a genuine EMU. The index thus encapsulates the development of EMU and the steps needed to make it robust in the long run, faced with the challenges of a rapidly changing global economic landscape.