Wage-Led Response to the Euro Crisis

This project claims that the EU needs to engage in a genuine learning exercise, both fixing the problem and, more importantly, challenging the flawed EMU paradigm under which the problem developed in the first place. The paper will investigate the main legal avenues that would enable implementation of a more socially orientated response of this sort. One ambitious route advocates a great rebalancing – that is, a fully-fledged Political Union – which would require Treaty changes. The EU might ultimately see the emergence of a third-order change in the long term, but this kind of paradigmatic shift seems unlikely to occur in the medium-term, nor is it the only way to avoid disintegration.

A more modest solution would be to opt for a reflexive rebalancing, which does not have to take the form of hard law. Treaty changes may help, but the EU already has sufficient legal means at its disposal to counter internal devaluation pressures. It is, for instance, legally feasible to implement a reflexive rebalancing approach through learning mechanisms. The social roadmap of the Blueprint on the strengthening of the EMU represents a step in that direction, but a genuine process would require a more ambitious approach.

The project will argue that a reflexive solution could draw the appropriate lessons from the crisis, namely by addressing the EMU’s asymmetric design. Specifically, we advocated an amended OMC-type approach in place of full political integration, one that would reflect the existing strengths of the EU institutional design.