Europe in Turmoil: Economic Governance in Europe and Weak Links

Thursday, July 13, 2017
JWS - Room J10 (J355) (University of Glasgow)
Shawn Donnelly , Dept. of Public Administration, University of Twente
while the BU and EMU reform projects increase resiliency in

principle, they involve two key risks to financial stability (and consequentially economic activity,

employment and ultimately political radicalism). The first, as evidenced most strongly in Greece

and now in Italy, is that downward adjustment in the banking and public finance sectors to comply

with BU and EMU reform initiatives pose grave risks to the economies and polities of fragile

member states. The second, as evidenced more broadly throughout the eurozone in particular, is

that both banking and EMU reforms imply significant economic decline throughout the southern tier

of the eurozone, which leads them to be chronically fragile. Proposals to increase resilience in the

face of this fragility have been channeled into alternative means of avoiding uncontrolled financial

collapse (innovations in cross-border lending and balanced budget commitments) that reinforce

rather than alleviate the financial stress that the southern tier experiences. A side-effect of this

development is that the Eastern European countries that have remained outside the eurozone core

of the EU are likely to remain outside indefinitely.

This paper reviews the institutional developments within Banking Union and EMU reform, the

economic and financial implications they produce, reviews how countries have fared, and the state

of intergovernmental negotiations at the EU level to adjust the institutional matrix. It uses the

evidence to conclude that resilience in Europe outside of the rich northwestern hub of countries

around Germany will continue to remain weak, as institutional design perpetuates and aggravates

weaknesses elsewhere.

  • Donnelly-European Resilience after Banking Union.pdf (190.4 kB)