Will a president Macron be able to reform the eurozone?

European financial markets are already betting on the victory of centrist French presidential candidate Emmanuel Macron in the country’s May 7 second-round election.

Are investors right to believe that the eurozone – the monetary union of countries that have incorporated the euro as their national currency – will gain new momentum with Macron in the Élysée Palace?

In this piece, written for The Conversation, I argue that Macron will have better chances to reform the Eurozone by pushing for a rebalancing of Eurozone governance rather than advocating “to set up a common eurozone treasury with a single finance minister”.

Instead, while in some areas centralization is needed to ensure stability, in particular with respect to a central bank that can effectively backstop financial crises and a full banking union, it might be advisable to renationalize fiscal policy.

The reasons are twofold: First, the political chances to install a European finance minister are minimal. Therefore, there is a high risk that Mr. Macron might achieve little or no progress in his term, eventually increasing the chances for populist in the next presidential election. Second, giving back full control over the budget to the national authorities also means transferring back the responsibility for solid finances and replacing the various fiscal pacts, which never have really worked.

Of course, this may require to reduce the debt overhang of the past. But by doing it, this would give more room for a sustained Eurozone recovery and – eventually – even more widespread support for new Eurozone-wide fiscal mechanism for burden sharing. Read more… 

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