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EMU Crisis, Barroso and the Inter-Institutional Balance

19. December 2013, von Adriaan Schout, Comments (0)

The start of 2014 marks and important turn in the EU: the euro crisis seems over, everyone is getting ready for the ‘this time it is different’ election campaign for the European Parliament, and the EU has to come to grips with a new president and, possible, a new balance in the inter-institutional relations. It is this set of conditions that typify the current situation in European integration in which not all is what it seems. The reason of the current confusion is that we have not come to terms with the institutional fall out of the euro crisis.

The Lisbon Treaty was supposed to be the mother of all treaties putting an end to the need for further treaty reforms. The EP was a clear winner with new voting rights and the Commission was regarded as the main loser. The extent to which the European Council was the real institutional winner only became clear as the euro crisis advanced. Member States abhorred Barroso and his Commission so that new tasks were located elsewhere – EFSF/ESM to a special body in Luxembourg, banking control to the ECB. Yes, the Commission acquired an independent budget tsar but the real bite and the extent to which this commissioner is really independent are still in the balance. The first EU semester of Rehn gained applause; his second harvested doubts. Beyond doubt, however, seems to be the president of the European Council Herman Van Rompuy. Whilst Barroso was seen as a ‘pitiful coward’ who thwarted the Commission’s right of initiative, the European Council could shine under the seemingly spirited leadership of Van Rompuy.

However, the winner of the euro crisis might well be Barroso. Certainly, he has not nearly been the leader everybody had hoped for and he is known for his vanities. However, he showed himself able to play three games at the same time. First of all, he was wise enough to recognise that in the build-up of economic structures, heads of state had to come to grips with new rules – and loss of sovereignty. Therefore, he avoided collusions where there was no possibility to win. Knowing when to pick a fight is probably one of the most important characteristics of a Commission president. Secondly, he defended the traditional role of guardian of the treaties. How weak was he really? Commission president Barroso was not weak-hearted when it came to blocking state aid to sacred cows such as Opel and Citroen or to breaking up banks in Member States. France was attacked over fundamental human rights when groups of Roma were expelled – and, painful for Sarkozy, while a summit was going on and maximum press visibility was ensured. Similarly, free movement of people is defended with gusto against political pressure from countries such as Germany, UK and the Netherlands. Thirdly, Barroso reinforced the institutional relations with the European Parliament. The ‘this time it is different’ slogan is a next step in this trend. Barroso has been publicly expressing ‘governmentalisation’ ambitions and referred to commissioners as ministers in his economic governance blueprint. And European ministers need a true European Parliament.

Now that the important economic governance rules are being formulated and implemented, it is to be expected that the European Council will have less to do. Hence, the successor of Van Rompuy will be (much) less relevant. If, of course, Van Rompuy was really as relevant as seems now – he might well have provided the only fig leave behind which Merkel could hide her power. What will remain after the elections of 2014 is a stronger bond between EP and Commission and a more symbolic role for the president of the European Council. So, the EU may have a president at last: the president of the Commission.

Dutch minister for foreign affairs, Frans Timmermans, wrote in the Financial Times that he would now like to see that the Council broke into this ever closer bond between the European Parliament and the Commission. In 2009, the Benelux countries argued for a stronger role for the Commission. In view of the ‘governmentalisation’ of the Commission, the Dutch now argue in favour of strengthening the European Council. This may well be a big compliment to Barroso: the ‘weak president’ has thwarted the inter-institutional balance.
Before 2008, the EU basically consisted of the internal market and was based on the community method. At the start of 2014, the EU consists of two veritable pillars: the internal market and the political economic governance pillar where Commission and EP are looking for a different (political) ball game all together. Of course, the euro crisis has been hugely instrumental in this development. Yet, judging by the results, the position of the Commission under Barroso has certainly not been marginalised. History may well be kinder to him than his current critics.

Europe For Citizens

“This project has been funded with support from the European Commission. This publication reflects the views only of the author, and the Commission cannot be held responsible for any use which may be made of the information contained therein.”

Are we Living in a Post-EU Society?

20. November 2013, von Adriaan Schout, Comments (0)

There seems to be a paradox: whereas the euro crisis has enforced deeper integration, economic and political attention is shifting away from the EU. Europhiles blame the Eurosceptics but EU-watchers should be careful to follow simplistic reasoning.

Dutch Foreign Affairs Minister Frans Timmermans has the reputation to be an EU-believer and was, among others, a convinced member of the Convention that drafted the Constitutional Treaty. When he became minister of foreign (including EU) affairs, the general impression in the Netherlands, and the rest of the EU, was that his appointment was a good sign of the Netherlands becoming pro-EU again. However, now one year in office, Timmermans has shown himself rather critical of the EU. He talked about a ‘Brussels bubble’ that has lost touch with reality, criticised EU salaries and insisted on closer control of the EU Commission by the European Council (i.e. intergovernmentalisation of the Commission). Of course, it is possible to contribute this to pragmatic kowtowing to the political signs of our times or to the more reserved EU attitude of the Dutch liberal Prime Minister Rutte and his coalition government of which Timmermans is a member.

Yet, there is more. Minister Timmermans is also travelling extensively abroad. In fact, he is much more in other parts of the world than in Brussels or in EU Member States. One could could argue that the Dutch international influence via the EU would be more pronounced and, hence, that the use of all his international activism outside the EU is debatable.

In the meantime, across the channel, Cameron has expressed the possibility of an in-out referendum. A part of British industry has been issuing threats of leaving the country, and many in the EU are once again appalled by the Brits who continue to be unsurpassed EU-sceptics. However, rather than condemning – as so often happens – the Brexit discussion ignited by Cameron, we could also try to take the British debate seriously. Similarly, we might need to consider that Timmermans’ external perspective is well-founded. In any case, it has to be admitted that the British are good at thinking outside the box, so maybe there is more substance behind the Brexit debate than simple Euroscepticism.

Studies also show that big as well as small and medium-sized industry in the UK question the relevance of current EU policies and of the importance of the EU. Whereas about half of the UK’s exports go to the EU, the other half is going to other parts of the world and, more importantly, it is there where the growth in export – not just the UK’s ─ is taking place. Discussions about competitiveness are now primarily linked to comparisons with countries such as India, China, Brazil and the USA.

Hence, rather than sticking to European navel-gazing, it seems justified to look at the rest of the world for market opportunities and for new threats. In principle, questioning social policy objectives – maybe precisely because they are more symbolic than real – and other developments in for example the growing tasks of the ECB and in the EU’s economic governance, seems a valid starting point in the current debates on the future of the EU. It is crucial to consider what such trends imply for the EU’s competitiveness. This is important from an economic perspective but one also has to consider that the EU’s international security and influence are intimately related to its economic strength. External benchmarking of the EU’s competitiveness should not suffer from internal euro crisis debates.

The EU may have to come to terms with the fact that we work and live in a post-EU society, which also helps to put the traditional European claims into perspective. There is a keen awareness in the Netherlands that 70% of our trade goes to countries within the EU, especially to countries within 1000 kilometres of our borders. This has actually little to do with the EU. Trade relations with neighbouring countries are bound to be important, irrespective of the European integration project. Although important, extensive trade with countries close by are more or less traditionally given. Trade with other parts of the world is clearly increasing and posing new and painful challenges. To focus trade relations more on the rest of the world seems a natural and necessary development.

We in the EU may have to accept the post-EU society as a reality. Voters, consumers and industry have interests beyond the internal market and internal eurozone worries. This recognition has, in principle, little to do with anti-EU sentiments. It would be a mistake to taboo those who’ cast their nets out further’. On the contrary, accepting this might actually help us to get a better focus on what is important within the EU, e.g. standing together in external relations, and what is potentially dangerous such as, for example, creating a French-type EU. The European Union is important, but there is a lot more in the world that counts.

Europe For Citizens

“This project has been funded with support from the European Commission. This publication reflects the views only of the author, and the Commission cannot be held responsible for any use which may be made of the information contained therein.”

Parallel Currencies are no Alternative for the Euro

21. October 2013, von Adriaan Schout, Comments (0)

Many are upset about the ‘TINA-type solutions’ for the euro crisis. ‘There-is-no-alternative’ (TINA) seems to have been an irrevocable characteristic of the euro right from the start. A sense of ‘having been forced onto the people’ was kindled by the fact that in most countries the single currency was adopted without referenda. Subsequently, many of the measures including EFSF, ESM, disputable bail-outs of governments and banks by the ECB, sharpening up of the stability and growth pact and the 2pack (which forces Member States to hand in national budgets before being adopted in parliament) have all contributed to the image of the euro as extremely risky and as an undemocratic intrusion on national competences. On top of this, many countries struggle with the constraints of the dubious 3% rule. If economic governance is to work, Barroso in his blueprint has given a clear insight into what it involves, including an EU finance minister and EU bonds.

There is a sizeable group in the eurozone that does not want these TINA-type steps towards a federalised and centralised EU. Many would like to leave the EU straight away. Others, such as German Professor Kerber and adepts of The Matheo Solution, suggest to introduce types of parallel currencies or currency units (calculation currencies such as the ECU). According to Kerber, if southern states do not want to leave the euro zone, then the countries with a current account surplus should introduce their own currency. He suggests that since the relevant northern countries are only Germany, the Netherlands, Austria, Finland and possibly Luxembourg, the new currency might as well be the DM under the watchful eye of the Deutsche Bundesbank.

Hopes of a parallel currency immediately lead to serious questions (even if we ignore the political complications and impossibilities). Firstly, there are legal questions about breaking away from the eurozone. Will the Commission use all legal means to ensure the integrity of the eurozone? Secondly, one should not think lightly of the consequences for the competitiveness of the new DM block when the DM revaluates. Thirdly, a break-up would complicate the necessary steps towards the banking union even more and thwart the internal market at least in financial services. With bouts of devaluations, any banking resolution mechanism would be frail. However, most worryingly of all would be the fall back towards the ERM (European Exchange Rate Mechanism) days when especially southern countries had to devalue repeatedly. This had profound economic consequences including financial losses while structural changes continued to be stalled and spells of high unemployment because countries mostly postponed devaluations to ensure prestige. (B. Connolly (1994), The Rotten Heart of Europe, Faber and Faber.)

The changes for successful reforms in countries outside the euro framework are (decidedly) lower than within the eurozone. The best options for structural changes in expenditures, labour market reforms, tax reforms, deregulation, anti-corruption policies, rule of law measures, banking supervision, etc. are within the euro system. This will, in the long run also benefit the eurozone and EU more broadly.

Evidently, the costs of dealing with the current bubbles in the eurozone are huge. However, these costs in terms of ban risks and government deficits have already been committed and have been shifted to, among others, the balance of the ECB. They will not go away with a break-up of the euro. Inside or outside the euro, adaptations will remain expensive.

Of course, we can throw away all hope for reform in countries such as France, Italy and Greece. If we are so negative, we would better dismantle the euro as soon as possible. However, it would be in all our interests to ensure reforms. Changes seem to be taking place in and, in any case, prospects for reform are best within the eurozone (ask the Dutch).

Parallel currencies show at least that alternatives for the euro do exist but it seems wise to keep such disruptive alternatives at bay for the time being. Thoughts about parallel currencies are signs of serious euro frustration but not of ‘cold thinking’.

Europe For Citizens

“This project has been funded with support from the European Commission. This publication reflects the views only of the author, and the Commission cannot be held responsible for any use which may be made of the information contained therein.”

Will France Become like the Netherlands or the Netherlands like France?

28. May 2013, von Adriaan Schout, Comments (1)

To understand the euro project we need to go back to 1989 and the frustrations over exchange rate adaptations under the European Exchange Rate Mechanism (ERM). France was frustrated by the hard Deutsch Mark and, occasionally, lost billions on aligning the FF to the DM. Mitterrand used the German unification as a lever to get Kohl to accept the euro. This was regarded by the Dutch with grave worries for various reasons. In essence, the euro is a French project.

For one, the Dutch, together with the Germans, wanted at least to ensure that the euro would be a hard currency and demanded the Maastricht criteria, the SGP and an independent ECB. The demand for rules to reinforce economic institutions continues and resulted of late in an ‘independent Commissioner’ and semi-automatic sanctions. The euro may have a French pedigree but was supposed to become German/Dutch and, with that, ‘southern’ Europeans would/should become like the Germans/Dutch. One of the most recent steps in this effort was the line in the six pack that all countries should have an independent budgetary authority. The Dutch have such a prestigious economic analysis bureau but in France this function has been part of the Ministry of Finance. Strong economic governance goes together with strong, independent, rule-bound and transparent institutions.

The Netherlands is now in a recession and economic prospects seem to be gloomy for some time to come. To be able to reform, the Dutch need to rely on their proven social ‘polder-model’ and recently a social pact between employers and employees was agreed on and supported by the government. However, the government did not want the independent budgetary control office to examine the consequences of this social pact nor its implications for the 3% rule. Moreover, this control office recently had a shift in leadership and a top civil from the ministry of finance was appointed. The new director may be extremely competent but the image of independence is endangered. Moreover, Prime Minister Rutte spoke out to be optimistic about economic prospects. Yet, over-optimism has been one of the most annoying characteristic of politicians when it comes to reliable statements about the SGP criteria. Recently Hollande also presented a brighter economic future for France than Olli Rehn. In the debate for EP on 7 May, Dijsselbloem ̶ albeit it as chair of the Eurogroup ̶ emphasised that we should not examine the weakness of banks until the eurozone has the resolution mechanisms in place. Hence, the message seems to be, let us postpone the facts until we think we are ready. Is it wise to circumvent facts, to thwart the image of independence and not to analyse major reform proposals?

Rumsfeld once stated that there are known unknowns and unknown unknowns, but the eurozone has invented the ‘unknowns we’d rather not know’. The French had a political perspective on the fiscal policy whereas the Germans and Dutch stood for rationality. As it now seems, the euro is not changing Hollande into Kohl, but it might make the Netherlands more French.

Europe For Citizens

“This project has been funded with support from the European Commission. This publication reflects the views only of the author, and the Commission cannot be held responsible for any use which may be made of the information contained therein.”

Dijsselbloem or DijsselDoom – a Dutch Perspective

9. April 2013, von Adriaan Schout, Comments (0)

I already presented my reservations against the appointment of Dutch Minister of Finance, Jeroen Dijsselbloem (Labour Party) as President of the Eurogroup. The public outrage following the bankruptcy of the banking sector in Cyprus has raised new questions concerning his ‘presidency’ (for which in Dutch the more modest ‘chairmanship’ is used). My initial doubts concerned the question whether this prestigious position would be in the interest of the Netherlands – and I was bold enough to propose Olli Rehn as possible candidate for a permanent chair after his departure from the European Commission in 2014.

The Cypriot turbulence in March immediately tested Dijsselbloem’s ability as a chair. He had become minister of finance in the Netherlands only in November 2012 and his appointment was almost immediately followed by rumours about his candidacy as president of the Eurogroup. In that respect, the criticism of his lack of experience and authority during the Cyprus crisis came as no surprise. For his two rescue proposals for Cyprus the media treated him on nicknames such as “DieselBoom”, “DijsselDoom” and “EuroBaldrick” (borrowed from the series Blackadder) as well as on appeals for his resignation. The fierce debates he provoked centre on the question as to whether the deposit holders are really completely safe. ‘True’ EU believers – and bankers who long for stability – would have preferred a banking resolution including European deposit guarantees in order to prevent bank runs whereas EU sceptics wished for the dismantling of the euro. Moreover, as was to be expected, Dijsselbloem was scorned as a Dutch puppet of Germany and blamed for defending the Dutch position instead of being a neutral chair.

Yet, in view of political realities like the upcoming elections in Germany and the public reservations against saving zombie banks and eurozone countries, the decisions of the Eurogroup to dismantle the Cypriot banks and to bail in seem inevitable. Moreover, given the lack of money in any country, it is highly unlikely that former Eurogroup President Juncker would have been able to orchestrate a different outcome. Approximately € 3 trillion is needed to stabilise banks in the eurozone. It is simply impossible to avoid more haircuts. Still, Dijsselbloem’s presentation of the measures appeared cold and his alleged Dutch bluntness provoked comments like the one by Juncker that you sometimes have to lie as chairman of the Eurogroup – as if financial markets preferred unreliability instead of predictability.

Also, the role of the chairman of the Eurogroup seems to be widely overestimated, if one has a close look at the EU power structure. A lot of criticism on Dijsselbloem is politically naïve in view of the strong resistance against the Cyprus bail-out not only in Germany but also in countries such as France where EU Affairs Minister Moscovici talked about “casino banking” on Cyprus. It seems widely regarded as reasonable to bail-in bondholders and deposit owners – particularly in the absence of an effective European resolution mechanism.

Hence, Dijsselbloem seems to have withstood the criticism well so far. Yet, there are issues for which he could be criticised, which in some cases can be blamed on his lack of experience. First of all, he made himself more important than he really is by ̶ during the hearing before the European Parliament ̶ taking the blame for the bailing-in of savings below €100 000 in the first deal with the Cypriot government. Firstly, the chair (President of the Eurogroup) is not a decision maker but mainly a spokesman: it was the decision of the Eurogroup to bail in those savings. Secondly, he referred to the bail-in of Dutch bondholders. A chair should be as neutral as possible and avoid telling the world how good his native country is in dealing with a crisis. Particularly Dutch politicians should take care not to be too outspoken. Dijsselbloem’s presentation of the Netherlands as a role model fuelled the criticism that he was pursuing a national agenda. Thirdly, he talked in terms of “core” and “periphery countries” as well as “the north” and “the south” whereas a chair should avoid divisions at any cost (as he later seemed to have realised).

Even though these issues are mainly issues of style and nothing serious, the international press once again saw a reason to complain about Dutch bluntness and about pushing through the Northern austerity agenda. Similarly, when Dijsselbloem, as Dutch Minister of Finance, attacked the Commission’s request for an additional € 11.2 billion for the budget for 2013, a question basically unrelated to the euro crisis, this led to head lines such as ”Dijsselbloem, president of the Eurogroup, joining forces with the UK” (EurActiv 3 April 2013). This shows that it seems to be inevitable that the chair of the Eurogroup is not regarded as neutral but as a national politician.

If Cyprus can cause an existential euro crisis overnight, it is very likely that more and more serious crises are to be expected. Against this backdrop, complaints about Dutch bluntness, accusations of Dijsselbloem acting as a German puppet or being part of the British camp, are particularly unhelpful both for the EU and for the Netherlands. What the Eurogroup urgently needs is a professional chair!

Europe For Citizens

“This project has been funded with support from the European Commission. This publication reflects the views only of the author, and the Commission cannot be held responsible for any use which may be made of the information contained therein.”

What a Tomato Can Tell us about the Euro

22. March 2013, von Adriaan Schout, Comments (0)

In order to form an opinion on the effects of the euro, we could start out from a simple question: what sort of impact had the introduction of the euro on a specific product, let us say a tomato, that a country (e.g. the Netherlands) cultivates and exports? The Netherlands has a strong horticultural sector. At first sight, it seems as if the Dutch exports in horticultural products have benefitted greatly from the euro. In 2010, almost 10% of the workforce worked in the production, knowledge development and trade of vegetables and fruits. 75% of the exports of tomatoes, cucumbers, paprika, etc. were within the EU. Exports within the EU have benefitted from European integration since 1992 with the removal of trade barriers, the definition of common food laws, the protection of patent rights and the introduction of the euro. Since the introduction of the euro in 2002 the exports of vegetables and of fruits have increased massively with 90% and more depending on products and regions. Exports to southern European Member States have proven to be particularly impressive with a growth of 241% between the introduction of the euro and 2010. Does this mean that the euro was a big success?

There are many reasons for this sharp increase in exports from the Netherlands and for the increasing imports by the southern Member States. One explanation for the favourable exports between 2002 and 2010 was the introduction of the euro. Tomatoes and related products are bulk products with low margins. Hence, the export success depends on enormous volumes combined with low profits margins. As a result, small changes in costs result in major changes in trade. The introduction of the euro contributed in two ways to the export success. The euro implied lower transaction costs, and lower costs with bulk products imply more exports. In addition, the economic conditions in the southern countries was inflated due to investments in housing, the inflow of cheap capital and high consumption. There were few incentives within the eurozone to lower wages and prices. As a result, Dutch horticultural exports to southern Member States flourished and investments in production went up, meaning that the success of the Dutch production and exports was partly a sign of failing market adjustments in the south.

Evidently, this upswing in Dutch exports has had its flip sides. Production in the south was pushed back before 2010. At the same time, investments in the Netherlands had gone up leading to the current overcapacities. These days, Dutch export of tomatoes within the EU is dropping. At first sight, this might appear to be a logical consequence of the general economic crisis given that consumption is falling in many eurozone countries. What is much less realised is that it is also the introduction of the euro that can partly be blamed for the present economic setback in horticulture. Currently we see wages in southern eurozone countries dropping, production and export of horticultural articles from the south are increasing, and, as a result, imports from the Netherlands drop and exports to the northern countries increase. Dutch export is not only dropping towards southern countries but also towards countries like the UK due to stronger competition from southern tomatoes.

Looking back, it would have been better had the market for horticultural products remained more in balance. The success of the exports was in part the result of failing markets within the eurozone. Would markets have adapted more smoothly, exports from the Netherlands would not have grown so fast and this would have prevented overinvestments and less adjustments once the crisis set in. Similarly, production in the south would have increased earlier had markets been more flexible.

This shows that the introduction of the euro – a macroeconomic development – resulted in microeconomic imbalances in the market for horticultural products. Looking back, the increase in Dutch exports following 2002 was too high and is now followed by a reversal of trade flows. The story of the tomato tells us that the increase in exports due to the euro was also a sign of insufficient adaptations in the south and has resulted in a hard landing that could have been prevented had the euro not functioned as a ‘sleeping pill’ to postpone market adaptations. At the same time, export surpluses were not matched by adaptations in exchange rates so that adaptions in the end have been more abrupt. What goes up must come down. Paradoxically, the euro has aggravated the ups and the downs. Like it or not, the well-functioning of markets is even more important with the euro.

Europe For Citizens

“This project has been funded with support from the European Commission. This publication reflects the views only of the author, and the Commission cannot be held responsible for any use which may be made of the information contained therein.”

The French Squeeze

14. March 2013, von Adriaan Schout, Comments (0)

There are signs that the economies in the eurozone are picking up in various ways. Recent figures of the ECB on Target2 (the capital account of the eurozone countries within the ECB) show remarkable signs of improvement. The claims of the triple-A countries Germany, Finland and the Netherlands on the problem countries are going down. The Dutch and the German claims at the peak of Target2 lending in 2012 amounted to € 173 billion and € 750 billion, but these have dropped by almost 20% since. There are many explanations for this development. Draghi’s promise to do ”whatever it takes” to keep the eurozone intact, has created the trust needed to restart trade in sovereign debt of Spain, Ireland, Portugal and Italy. In addition, (wage) reforms and austerity measures have reduced the imports; investors are returning and exports of for example horticultural products are increasing.

These developments in the south imply enormous reductions in risks for the budgets of northern countries. If the situation in the problem countries had deteriorated, the Target2 claims could have end up as losses – and downgrades – for the triple-A countries. These claims are not just important in terms of abstract risks on the ECB books, but they also have practical implications for the national debt positions. The Dutch government used the profits from the Central Bank on the sovereign debts from Southern countries to lower its public debt figures, so that the deficit is at least cosmetically closer to the 3% monitored by Olli Rehn. However, including the Target2 risks of the ECB in the national budgets would show that national debts are potentially much higher. Also in this respect the drop in the ECB’s Target2 exposure is good news.

However, the difficulties in the eurozone and the Target2 risks are far from over. The Global Competitiveness report for 2012-2013 displays the many remaining economic hurdles in the eurozone including repeated warnings over inflexible labour markets in Spain. Moreover, the outcome of the recent elections in Italy obviously creates additional challenges.

The real worry however is France. Its Target2 deficit has not gone up due to the deterioration of its current account. Moreover, its public debt is rising above 95% – which means that its debt becomes unsustainable. The global competitiveness index of France has fallen last year from 18 to 22. It is doubtful whether the French social economic institutions – including its labour relations – are up to the economic challenges France is facing. Despite the efforts of Olli Rehn with the reinforced EU semester, France has shown few signs of improvement over the past year. Worryingly, with the economic reforms in its neighbouring countries including Spain and the Netherlands, its competitiveness and current account balance is being threatened from all sides.
We saw in August 2011 that financial markets woke up to the worries over Italy’s economic situation. Typically, this awakening did not happen with a whisper but with a bang. The crisis in the eurozone was then probably at its worst because of the size of the Italian economy. An immediate crisis over France may not be around the corner, but all ingredients for the next major euro problem are present. Symbolically as well as economically, a eurocrisis over France would be extremely damaging to the European integration project as a whole.

It is surprising that the French interest rates are currently still comparable to those of Germany. Either financial markets are irrational or they are counting on Draghi’s unconditional support for France. Both explanations would be very dangerous economically and politically. Irrational financial markets could prove to be extremely volatile and a repetition of August 2012 is possible. Alternatively, German – and Dutch – patience with Draghi and the ECB could reach its limits. FDP chairman Brüderle already warned France that reforms are needed. The EU cannot afford an existential crisis because of French economic negligence.

Europe For Citizens

“This project has been funded with support from the European Commission. This publication reflects the views only of the author, and the Commission cannot be held responsible for any use which may be made of the information contained therein.”

Blog Authors

Adriaan SchoutAdriaan Schout

Dr Adriaan Schout is Deputy Director Research/Europe at Clingendael, Netherlands Institute of International relations. (read more...)

Alexandre AbreuAlexandre Abreu

Dr Alexandre Abreu is a 33-year-old Portuguese economist with a PhD from the University of London. Currently he is a lecturer in Development Economics at the Institute of Economics and Business Administration, Technical University of Lisbon, and a Researcher at the Centre for African and Development Studies of the same University.

Almut MöllerAlmut Möller

Almut Möller is a political analyst in European integration and European foreign policy. She is currently the head of the Alfred von Oppenheim Centre for European Policy Studies at the German Council on Foreign Relations (DGAP) in Berlin. (read more...)

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