The Euro has generated an The Euro has generated an unsustainable divergence of unsustainable divergence of

productive systems and national productive systems and national trajectoriestrajectories

Robert BoyerInstitut des Amériques

Conference Erasmus Mundus, Paris, Conference Erasmus Mundus, Paris, September 10September 10thth 2015 2015

IntroductionIntroductionTwo conventional explanationsTwo conventional explanations1.1.A simple first generation crisis (fix exchange A simple first generation crisis (fix exchange rate, capital mobility and public deficit)rate, capital mobility and public deficit)

2.2.No money without sovereign stateNo money without sovereign state

They have a point, but are not allThey have a point, but are not all:

1.1.Why ten years of apparent success?Why ten years of apparent success?

2.2.Monocausal, a-historical, normative approachesMonocausal, a-historical, normative approaches

The orientation of this The orientation of this presentationpresentation

1.1. Replace the concept of equilibrium by an Replace the concept of equilibrium by an analysis of interdependent social, analysis of interdependent social, political and economic processespolitical and economic processes

2.2. Replace exogenous adverse shocks Replace exogenous adverse shocks leading to the crisis by the unfolding of leading to the crisis by the unfolding of endogenous trends generated by the Euroendogenous trends generated by the Euro

3.3. Put in historical perspective half a Put in historical perspective half a century of European Integration century of European Integration

4.4. Recognize the strategic role of key Recognize the strategic role of key collective actors at odds with a collective actors at odds with a technocratic quasi determinist way out of technocratic quasi determinist way out of the crisis the crisis

The argument of this presentationThe argument of this presentation1.1.The neglected intellectual origins of the The neglected intellectual origins of the

Euro-zone crisisEuro-zone crisis. .

2.2.An institutional and historical analysis An institutional and historical analysis allowed to anticipate the current euro-zone allowed to anticipate the current euro-zone crisiscrisis

3.3.A benign neglect for political legitimacy of A benign neglect for political legitimacy of the euro within democratic societiesthe euro within democratic societies

4.4.The role of financial globalisation in the The role of financial globalisation in the genesis and unfolding of the euro-zone crisisgenesis and unfolding of the euro-zone crisis

5.5.The end of the euro or a united states of The end of the euro or a united states of Europe? A future open to a large variety of Europe? A future open to a large variety of configurationsconfigurations

I. I. THE NEGLECTED THE NEGLECTED INTELLECTUAL ORIGINS INTELLECTUAL ORIGINS

OF THE EURO-ZONE OF THE EURO-ZONE CRISISCRISIS

1.1. New classical macroeconomics at New classical macroeconomics at odds with the major issues about odds with the major issues about the Eurothe Euro

Table 1 - Table 1 - The The consequences of consequences of the new classical the new classical macroeconomics macroeconomics

upon the upon the assessment of the assessment of the

viability of the viability of the EuroEuro

Hypotheses Mechanisms involved

Consequences of Euro

Degreeof realism

1. Exogenous money created by Central Bank

Typical monetarismNeutrality of money in the long run

Price stability is the first objective of Central Bank

In modern financial system, endogenous money creation

2. Full employment equilibrium

Perfect adjustment by prices and wage flexibilityOnly voluntary unemployment

Basically no inflation / unemployment trade off

Large and steady involuntary unemployment in many EU economies

3. Symmetric shocks will prevail over asymmetric, country specific shocks

Thus a common monetary policy will fulfil the bulk of macroeconomic adjustments

Euro-zone can be viable even if it is not an optimum for monetary unification

Significant endogeneity of productivity at the national level

4. Rational expectations for all actors:

- Firms, households

- governments

The economic policy rule associated to the Euro will affect all private and public strategies

The irreversibility of Euro is crucial for its credibility

Adaptation of firms and banks…But governments play a domestic political games

5. The same size for all

Existence of generic economic adjustments common to all member-States

The Euro will speed up a nominal and possibly real convergence

The Single Market has generated a deeper division of labour, hence heterogeneity

2.2. A polarization over the relative frequency of symmetric and asymmetric shocks.A polarization over the relative frequency of symmetric and asymmetric shocks.

3.3. Governments as servants of economic rationality: they had to comply with the Governments as servants of economic rationality: they had to comply with the reforms required by the irreversibility of Euro membership.reforms required by the irreversibility of Euro membership.

4.4. The benign neglect for dissenting but probably more relevant theories and The benign neglect for dissenting but probably more relevant theories and analysesanalyses

Table 2 - A more accurate

and fair assessment by

alternative approaches

ApproachCore

mechanismsConsequences

for EuroDegree of realism

1. Keynesian Theory

Generally effective demand is the key determinant of employment

Orthodox restrictive monetary policy and limits to public deficit will imply high unemployment

Realist for the period 1993-1999, but not from 2000 to 2008

2. Neo-Schumpeterian Theory

Innovation is the engine of growthThe knowledge based economy is the new paradigm

Speed up innovation via RD and structural reformsGrowth is the condition for the success of the Euro

Germany and Northern Europe, good pupils of the EuroLagging Southern Europe

3. New Economic Geography

Increasing returns imply geographical polarization

The Euro triggers a deeper division of labour among regions and countries, hence larger national heterogeneity

The productive unbalances put the Euro at risk, in absence of fiscal federalism / large labour mobility

4. Post Keynesian Theories

Built in instability of finance in the context of liberalisation, innovation and globalisation

Need to build the credibility of the Euro with respect to international finance, at the cost of lower growth

A typical sequence of optimism (2002-2007) and recurring pessimism (2008-2012)

5.5. Early warnings about the Early warnings about the difficulties in implementing the difficulties in implementing the Excessive Deficit ProcedureExcessive Deficit Procedure

Table 3 - Table 3 - The drift of public finance could be The drift of public finance could be (and has been) anticipated(and has been) anticipated

ApproachCore

mechanismConsequence

for EuroDegree

of realism

Public finance

Theoretical conditions for public finance sustainability

The criteria selected by the Stability and Growth Pact extrapolate past growth patterns

Any growth slowdown implies a frequent violationBetter rules are available

Econometric analyses

The rules of SGP have been frequently violated in the past

It will be difficult to enforce

Actually many countries have been unable to stick to the rule since 2003, including France and Germany

Political economy

Politicians respond to domestic social demands

Public deficits will expand in economies with major adjustment problems to the Euro

Virtuous competitive Northern Europe versus lagging Southern economies

II. II. AN INSTITUTIONAL AND AN INSTITUTIONAL AND HISTORICAL ANALYSIS HISTORICAL ANALYSIS

ALLOWED TO ANTICIPATE ALLOWED TO ANTICIPATE THE CURRENT EURO-ZONE THE CURRENT EURO-ZONE

CRISISCRISIS

1.1. Back to the basic principles about Back to the basic principles about the viability of any economic policy the viability of any economic policy regimeregime

Table 4 – J. Tinbergen’s analysis of economic policy: the Euro means the loss of two key instruments and the ability to refinance public debt via the Central Bank

Instruments

ObjectivesThe Golden

Age

The routeTowardsthe Euro

After the Euro

1.Inflation Autonomous monetary policy

Eventually income policy

Restriction upon monetary policy (defence of exchange rate)

Mainly the objective of the European Central BankInterdiction of the refinancing of national public debts

1.Full employment Mainly Budgetary policySometimes Social

Pacts

Restriction upon budgetary policy (lower public deficit)

Budgetary policy restricted by the Stability and Growth PactStructural reforms (competition, labour market)

1.External equilibrium

Adjustment by political

decisions upon the exchange

rate

Exchange rates become financial market

variables, tentatively

controlled by the Central

Bank

No more formal external constraint for Member StatesThe Euro/$/Yen exchange rates as pure market variables

1.Growth Innovation and industrial policy

Primacy of macroeconomic

approach

Enforcement of competition, as alternative of industrial policyComplemented by the Lisbon Agenda

2.2. European Integration is a process of European Integration is a process of progressive institution building around progressive institution building around basic public goods: financial stability basic public goods: financial stability was the next step after monetary was the next step after monetary stability.stability.

Figure 1 – A bird’s view of half century of European integration

Prevention of European

Wars

Coal and Steel markets

European Markets

Lowering of internal

customs dutiesEuropean Directives

Collapse of the IMS

Single Act: revival of the common

market

Competition, a European public

good

Recurring exchange rate

crisis

European Monetary System

Worsening of exchange rate crises

Single currency and ECB: monetary stability

Impact of financial liberalization

Strengthening of the competition principle

Financial integration

Security, new public good?

Financial stability, a neglected public good?

Common customs tariff

3.3. Significant transformations in Significant transformations in “regulation” modes, especially difficult “regulation” modes, especially difficult for some economies, poorly for some economies, poorly internationalised.internationalised.

Table 5 - Table 5 - The Euro means an epochal change for national modes of “régulation”

PeriodsLevel of institutional forms

“Golden Age”1945-1971

The painful decades

1972-1999

The happy days of the Euro 2000-2009

The decade of reckoning 2010 - …..

1. Monetary Regime / Credit

National More and more constraints upon national monetary autonomy

The same European

monetary policy for all members

The loss of efficiency of ECB confronted with national banking and sovereign debts crisesMajor concern for financial stability

2. Wage labour nexus

National National, but transformations in reaction to fiercer competition

Still national but « benchmarking 

» at the European level

Labour market and welfare reforms in order to restore national competitiveness

3. Nature of competition

Mainly national

Growing impact of European competition policy

Stricter enforcement of competition at the European level

Overcapacity at the world level triggers fiercer competition

4. Insertion into the world economy, exchange rate regime

Exchange rate is the outcome of political decisions

Financial markets tend more and more to set exchange rates

A single common exchange rate set

by financial markets

Promotion of internal devaluations via wage austerity and welfare slimming down

5. Link State / Economy

Large welfare State

Recurring public and welfare deficits

Diverging evolution of

public deficits

Sovereign debt crisis, diverging trends across the Euro-zone

4.4. The long legacy of a North/South divide The long legacy of a North/South divide in productive capacity and in productive capacity and competitivenesscompetitiveness

Figure 2 – How Figure 2 – How do the factors of do the factors of

crisis differ crisis differ across the Euro-across the Euro-

zonezone

Greece

Poor quality of State / Government management

Spain

Portugal

Italy

Ireland

France

Germany

Finland

Netherland

Light touch regulation of finance

Poor Structural Competitiveness

Virtuous Northern Europe The ailing Southern economy

The Greek The Greek exceptionalismexceptionalism

France as a France as a barycentre barycentre

between North between North and Southand South

Ireland victim of Ireland victim of an unwise an unwise financial financial

liberalisationliberalisation

III. III. A BENIGN NEGLECT FOR A BENIGN NEGLECT FOR POLITICAL LEGITIMACY OF POLITICAL LEGITIMACY OF

THE EURO WITHIN THE EURO WITHIN DEMOCRATIC SOCIETIESDEMOCRATIC SOCIETIES

1.1. From the start, a polarisation of the From the start, a polarisation of the perception of the Euro by various perception of the Euro by various social groupssocial groups

Table 6 – France: the Euro is perceived to have different Table 6 – France: the Euro is perceived to have different consequences for various social groups.consequences for various social groups.

QuestionQuestion: What are likely consequences of EURO for : What are likely consequences of EURO for each of the following groups?each of the following groups?

Sources: SOFRES [1997]: 110.

Not too many problems

Tran-sitory

difficulties only

Long lasting

problems

Without ant

opinion

Large firms 100 %

62 32 4 2

Younger people 60 31 7 2

Small and medium size enterprises

37 53 6 4

Retailers 22 65 11 2

Savers 20 51 21 8

People with low incomes

7 49 41 3

Old people 1 8 90 1

2.2. Enter or not the Euro: the nature of the Enter or not the Euro: the nature of the political process matters.political process matters.

Table 7 - How a pluralist debate led Sweden not to join the Euro

ASSESSMENT CRITERIA ADVANTAGES DRAWBACKS

SOCIAL EFFICIENCY

1. Transaction costs Saving 0,2 % of GDP with EMU Extra costs for accounting and conversion costs (probably inferior to the gains)

2. Short term fluctuations in exchange rates

Less uncertainty would benefit to trade and investment

Total uncertainty may increase (third countries exchange rate, future of national policy)

3. Interest rates Lower real interest rates, similar tp the German one

In the long run, no relation between the Euro and the real interest rate

4. Competition in the single market No more unexpected shift in national competitiveness due to exchange variations, less protectionnist pressures

Mainly valid for the financial sector, not so much product market

5. Inflation Given ECB strong independence, lower inflation is expected

Large efficiency effects are unlikely

ASSESSMENT ON SOCIAL FFICIENCY Probably a positive impact for Sweden….

….but many other policies (tax, education, welfare) have much more impact

STABILISATION POLICY 6. Symmetrical and asymmetrical shocks The greater credibility of ECB would

allow a stronger response to a common recession

The lack of synchronisation with the core of Europe and possible asymmetric shocks are very costly for Sweden

7. Other adjustment mechanisms International labour mobility

Few and small impact of the Euro per se

Nominal wage flexibility Very difficult to increase (not observed in the US)

Internal exchange rate changes (by shifting the tax burden)

Possible wage moderation Limited size of these adjustment compared with external exchange

8. Monetary policy autonomy outside the currency union

Less possibility to stabilise the economy

9. Macroeconomic imbalances and exchange rates

Reduction in the swings in nominal and real exchange rate.

10. Fiscal policy The excessive deficit procedure helps in curbing down public debt

Need for some transfers between countries

Interference with the role of fiscal policy as an automatic stabiliser

…but political objections

ASSESSMENT ON STABILISATION

OVER ALL NEGATIVE IMPACT The loss of autonomy in off setting country specific shocks is not compensated by the

general expected decline in the frequency of asymmetric shocks in the EU The Euro does not make easier labour market and supply side reforms.

POLITICAL IMPACT 11. The role of EMU in the European

integration A step towards political integration Strains on Unity between IN’s and

OUT’s Conflict upon ECB policy Unpopular national policy in order to

cope with EMU, specially if unemployment is high

12. Democratic control and accountability Some (limited) control over ECB Report to the European Council,

ECOFIN Council at the Commission Formal possibility to change the ECB’s

statutes by a new treaty

Opposition between an inter-governmental model (national parlia-ment control) and a federal project (strengthening of European parliament)

Small influence of any national parliament

13. Legitimacy of a decision on the Euro Euro is seen as a project for the “political and economic elite”

Risk of political polarisation Time is required to organise a demo-

cratic debate 14. National influences within the EU Larger if the country joins the EMU

(“give and take” process) and the common foreign and security policy (CFSP)

…but in any case limited influence of any single country

possible opposition between national preferred policy and EU’s position

ASSESSMENT ON POLITICAL IMPACT Joining the Euro increase, the country’s influences within the EU, at the cost of less democratic control upon monetary policy.

OVER ALL ASSESSMENT Small but certain efficiency gains, reduced macroeconomic imbalances but less ability to cope with country specific disturbances, a positive contribution to European political integration but possible conflicts. “It is difficult to see that the advantages of the EMU are very substantial and unequivocal”….but a failure to implement would create acute credibility problems.

Source: built upon Calmfors & alii (1997:305-339)

Figure 3 – Is the Euro-zone politically viable in Figure 3 – Is the Euro-zone politically viable in the medium-long run? An analytical frameworkthe medium-long run? An analytical framework

3.3. The resilience of the Euro versus a The resilience of the Euro versus a renationalisation of economic policy? A renationalisation of economic policy? A permanent threat.permanent threat.

Figure 4 – Success of the Euro…or Figure 4 – Success of the Euro…or renationalisation of national policies?renationalisation of national policies?

Divided arena for European policy

making

Democratic gap A re-nationalisation of

polity

Problematic democratic legitimacy

A premium to protest parties and

Anti-European movements

Europeanization of regulation and

monetary policy

New context for national policy

making

Less autonomy

Erosion/Breaking up of past

national coalitions

A premium to more

Europeanised groups and actors

Forging a new national/European

political constituency

4.4. Europeanization as a modernisation Europeanization as a modernisation process and a burgeoning of European process and a burgeoning of European procedures in order to legitimize procedures in order to legitimize possibly unpopular domestic reformspossibly unpopular domestic reforms

Figure 5 – The use of European Union as constraints Figure 5 – The use of European Union as constraints or incentives to reforms blocked at homeor incentives to reforms blocked at home

5. The same European Treaties but 5. The same European Treaties but contrasted national interpretations: why contrasted national interpretations: why rescue plans recurrently failrescue plans recurrently fail

Figure 6 – The same European treaties…but Figure 6 – The same European treaties…but conflicting visions of the dynamics it impliesconflicting visions of the dynamics it implies

Source: Boyer (2000)

Table 8 – The paradox Table 8 – The paradox of the launching of of the launching of

the Euro: fear in the the Euro: fear in the North, enthusiasm in North, enthusiasm in

the Souththe South

IV. IV. THE ROLE OF FINANCIAL THE ROLE OF FINANCIAL GLOBALISATION IN THE GLOBALISATION IN THE

GENESIS AND UNFOLDING GENESIS AND UNFOLDING OF THE EURO-ZONE CRISISOF THE EURO-ZONE CRISIS

1.1. The surprising appraisal by The surprising appraisal by international finance: all public debts international finance: all public debts are now equivalent from Germany to are now equivalent from Germany to GreeceGreece

Graph 1 – A convergence of 10 years Treasury Graph 1 – A convergence of 10 years Treasury bonds interest ratebonds interest rate

Source : Patrick Artus (2010), « Quelle perspective à long terme pour la zone euro ?, Flash Economie, n° 158, 12 Avril, p. 4.

Graph 2 – A deepening of intra-European specialization: Graph 2 – A deepening of intra-European specialization: manufacturing in the North, service in the Southmanufacturing in the North, service in the South

Source: Patrick Artus (2011) “Pourquoi n’a-t-on pas vu, de 1999 à 2007, les problèmes de l’Espagne, du Portugal, de l’Irlande, de la Grèce? »”, Flash

Economie, n° 534, 9 juillet, p. 5.

A – Share of manufacturing in total value added

B – Employment in domestic services (100 in 1999.1)

2.2. Beneath nominal convergence, Beneath nominal convergence, divergence in specialisations and divergence in specialisations and domestic growth regimes: a structural domestic growth regimes: a structural complementarity accelerated by the complementarity accelerated by the Euro….Euro….

Graph 3 – A polarisation of external balance within the Euro zoneGraph 3 – A polarisation of external balance within the Euro zone

Current balance / PIB (%)Current balance / PIB (%)

……and a polarization of trade balance and a polarization of trade balance surpluses and deficits.surpluses and deficits.

Graph 4 – The evolution of Euro/dollar/yen exchange rates. Current balance / PIB (%)

3.3. The ambiguous blessing of Euro The ambiguous blessing of Euro credibility: its appreciation puts at risk credibility: its appreciation puts at risk the competitiveness of many national the competitiveness of many national economieseconomies

4.4.The consequences of the subprime The consequences of the subprime world crisis: a brutal wakeup call world crisis: a brutal wakeup call

by international finance in by international finance in response to the deterioration of response to the deterioration of

public finances…public finances…

Graph 5 – The deepening of public deficits after Graph 5 – The deepening of public deficits after 2008: selected countries.2008: selected countries.

Graph 6 – The brutal explosion of the cost of refinancing Graph 6 – The brutal explosion of the cost of refinancing of public debt of Southern Europe economiesof public debt of Southern Europe economies

… … With the explosion of the refinancing With the explosion of the refinancing costs of public debt for Greece, costs of public debt for Greece,

Portugal, IrelandPortugal, Ireland

Figure 8 – Figure 8 – Financial speculation reveals some of Financial speculation reveals some of the institutional unbalances of European the institutional unbalances of European

governancegovernance Launching of the Euro

The same monetary policy for all

Too restrictive for the most competitive

economies

Too soft for poorly competitive economies

Slow Growth for the European EU.

Catching up but real estate bubbles and/ or public

deficit

IMPACT OF THE

SUBPRISES CRISIS

Booming public deficits

Speculative attack upon

higher public debt countries

Lagging and uncertain responses of EU authorities

Again doubts upon the viability of the Euro without

fiscal federalism

5.5. From the Greek to the Euro crisis: a From the Greek to the Euro crisis: a complex web of factors and responsibilitiescomplex web of factors and responsibilities

Figure 9 – Figure 9 – DisentanglinDisentangling the various g the various causes of the causes of the

Euro zone Euro zone crisiscrisis

Figure 15 – The North / South divide is an obstacle Figure 15 – The North / South divide is an obstacle to the building of new federalist institutionsto the building of new federalist institutions

V. THE FUTURE OF THE V. THE FUTURE OF THE EURO : open to the strategic EURO : open to the strategic behavior of a complex web of behavior of a complex web of

actorsactorsProlonging the Prolonging the pastpast has become has become impossibleimpossible

““Europeans would be as strong as if Europe was united, retain Europeans would be as strong as if Europe was united, retain as much sovereignty as if it was not. This contradiction has as much sovereignty as if it was not. This contradiction has become untenable.”become untenable.”

Sylvie Goulard and Mario Monti (2012), Sylvie Goulard and Mario Monti (2012), De la démocratie en De la démocratie en EuropeEurope, Flammarion., Flammarion.

Table 9– A tentative assessment of the seven Table 9– A tentative assessment of the seven scenariiscenarii

SCENARIO STRENGTHS WEAKNESSES POLITICAL VIABILITY /

LEGITIMACY1.“FEDERALISM BY TECHNOCRATIC RATIONALITY”

2. “ORDOLIBERALISMUS FÜR ALLE”: A GERMAN EUROPE3. “A NORTH/SOUTH DIVIDE”: A FLEXIBLE EXCHANGE RATE BETWEEN TWO EUROS

4. “CHACUN POUR SOI”: A WAVE OF NATIONALISM AND PROTECTIONISM

Search for coherence and resynchronization of EU institutionsIntegration without fiscal federalism

New reduction in national sovereignty

Weak unless strong political impulse by a charismatic leader

Overcomes the basic present unbalances by a return to growth in Southern EuropeRecovery of national sovereignty

Does not overcome North/South structural unbalances

Deepening of the Maastricht Treaty principles that failed

A de facto breaking down of the EMU

A partial recovery of national autonomy but large political costs for federalistsA response to both left and ultra right demands

Possible large economic costs

Table 3 (follows) – A tentative assessment of the Table 3 (follows) – A tentative assessment of the seven scenariiseven scenarii

SCENARIO STRENGTHS WEAKNESSES POLITICAL VIABILITY /

LEGITIMACY5. “A BRITISH

VICTORY”: FREE TRADE ZONE + AD HOC PARTNERSHIP6. “MORE DEMOCRACY”: AS A CONDITION FOR A PATH TOWARDS A FEDERAL EUROPE

7. “INTERNATIONAL FINANCE STRIKES BACK”: THE STORM AFTER THE CALM

A reconciliation of the diversity of national interests

A response to the erosion of EU legitimacy

The end of the political federalism in Europe

A third way between complete collapse and a federalist Europe

Puts a pressure upon an unsustainable European configuration

Assumes that an European citizenship can be the cornerstone of a new EU

Dubious in the midst of economic depression

Puts at risk the very basic European project

The real economic global power: complete mobility of huge amount of capital

This is an abstraction of the sequence This is an abstraction of the sequence observed since 2010 observed since 2010

Impulse of

finance

Reaction of ECB

Conflict with

ordoliberalism

North/South Divide

Chacun pour soiBritish

victoryUnder

the scrutiny

of Federalism with

democracy

Exit from Euro

The end of the Euro

But many other patterns may happen: an But many other patterns may happen: an exampleexample

ECB leaders

hip

Slower nationa

l reform

s

Assessment by finance

New wave of

speculation

Exit

Bank Union

Agreement

Lack of agreeme

nt Exit

Need for

fiscal federali

sm

Agreement

Exit

Calms market

CONCLUSIONCONCLUSIONC1C1. . The Euro crisis was largely The Euro crisis was largely undetectedundetected

because the paradigm shift to the new because the paradigm shift to the new classical macroeconomics made such an classical macroeconomics made such an event event impossibleimpossible: structural stability of a : structural stability of a market economy, full rationality of market economy, full rationality of private and public actors, neutrality of private and public actors, neutrality of the money, absence of any bank or the money, absence of any bank or financial markets. By contrast, financial markets. By contrast, institutional analyses could anticipate the institutional analyses could anticipate the adverse consequences of the adverse consequences of the loss of loss of autonomy autonomy of national “régulation” modes of national “régulation” modes for the weakest economiesfor the weakest economies..

C2. The C2. The structure of polity mattersstructure of polity matters. It . It has played a major role in the has played a major role in the decision to adopt or not the Euro, decision to adopt or not the Euro, given the diversity of its impact upon given the diversity of its impact upon various domestic socio-economic various domestic socio-economic groups. groups. Technocratic Technocratic approaches have approaches have favored the adhesion, whereas some favored the adhesion, whereas some social democratic social democratic societies have societies have favored a wide deliberation, leading to favored a wide deliberation, leading to the statu quo, given the large the statu quo, given the large uncertainties associated to the Euro.uncertainties associated to the Euro.

C3. C3. Financial globalization Financial globalization and innovations and innovations have too a clear responsibility in the genesis have too a clear responsibility in the genesis and the unfolding of the Euro-zone crisis. and the unfolding of the Euro-zone crisis. Basically they have removed the inter Basically they have removed the inter temporal constraints for households and temporal constraints for households and State and generated State and generated real estate bubbles real estate bubbles (Spain, Ireland). Unfortunately, the (Spain, Ireland). Unfortunately, the governments had governments had delegateddelegated to international to international finance the control and monitoring of their finance the control and monitoring of their public finances. Therefore, finance has first public finances. Therefore, finance has first fuelledfuelled an economic boom and then an economic boom and then revealedrevealed the non-sustainability of the sovereign debt the non-sustainability of the sovereign debt of the weakest economies.of the weakest economies.

C4. C4. Beneath the veil of smooth Beneath the veil of smooth monetary integration, financial monetary integration, financial deregulation has temporarily deregulation has temporarily hidden the hidden the diverging economic diverging economic specializationspecialization between Northern between Northern and Southern countries. This is a and Southern countries. This is a major obstacle to the viability of a major obstacle to the viability of a federalism built upon the federalism built upon the absence absence of solidarity of solidarity via a fully fledged via a fully fledged fiscal federalism. fiscal federalism.

C5. C5. There are There are as many futures as collective as many futures as collective actors actors able to shape the strategy of able to shape the strategy of others towards more coherent repartition others towards more coherent repartition of competences. Partial or full collapse of of competences. Partial or full collapse of the Euro under the pressure of the Euro under the pressure of financefinance, , North / South divide, possible decisive North / South divide, possible decisive impulsion of the impulsion of the ECBECB, rebirth of an , rebirth of an European community European community approach as an approach as an alternative to inter-governmentalism, alternative to inter-governmentalism, last but not least, a new path for a more last but not least, a new path for a more democratic control of the economy democratic control of the economy at the at the national and European levels.national and European levels.

Thanks for your Thanks for your attention and attention and

patiencepatienceRobert BOYER

INSTITUT DES AMERIQUESINSTITUT DES AMERIQUES

175, rue du Chevaleret175, rue du Chevaleret

75013 PARIS (France)75013 PARIS (France)

e-mail : robert.boyer@ens.fr

web sites : http://www.jourdan.ens.fr/~boyer/