Business

France and Germany agree on eurozone reform

PARIS — Governments talk a lot about eurozone reform but cant get their act together. So its time for academics to step in.

That impatience seems to be at the core of an unprecedented initiative by French and German economists, who published Wednesday a detailed plan on how to make the monetary union shock-resistant and a better guarantor of long-term prosperity.

Fourteen influential scholars, who in September published a joint op-ed in Le Monde and the Frankfurter Allgemeine Zeitung to urge their respective governments to be bold on reforming the monetary union, have taken a step further to detail what they think should be done — and the sooner the better.

The basic idea underlining their plan — which came in the form of a “policy insight” jointly published in Paris and Berlin — is that France and Germany may well be separated by historical and cultural differences in their approach to monetary union, but both make strong arguments. The plan is given extra weight because the German authors are more varied than the usual center-left academics traditionally sympathetic to French arguments.

There is no time to waste, the economists argue, because no one knows when the next financial crisis will hit.

In a nutshell, the eurozone needs both financial discipline — as the Germans argue — and risk-sharing — as the French insist on. But both need to be credible, and must stop relying solely on either strict rules that cant be enforced, or government promises that cant be kept.

Furthermore, there is no time to waste, the economists argue, because no one knows when the next financial crisis will hit, and even though the economy is recovering at a brisk pace, the eurozone remains vulnerable.

The report seems to make a point to skirt around the terms in which the eurozone debate has been framed in the last few months, notably by French President Emmanuel Macron who has pushed for grand reforms including the creation of a eurozone finance minister who would manage a “common budget.”

Neither a finance minister nor a joint budget are mentioned in the paper because, according to one of the authors, Agnès Bénassy-Quéré, “that is not a crucial question” for the monetary union. Another of the headline reforms for the single currency bloc — the German idea of transforming the bailout fund known as European Stability Mechanism (ESM) into a full-fledged and strictly independent “European Monetary Fund” — is similarly discarded.

Instead of highly charged words that may encounter political obstacles, the 14 economists suggest six major economic reforms that they argue should be undertaken simultaneously and without waiting — although the actual debates, votes and implementation of the package would have to be spread over several years.

First, the banking systems residual weaknesses need to be taken care of. That means limiting the amount of sovereign debt of their own countries that banks can keep on their balance sheets, shrinking their stock of bad loans, and completing the deposit guarantee scheme, which would help avoid possible bank runs in times of crisis.

Second, the EUs deficit rules need to be reformed, and made both simpler and more credible. “Im unable to explain the current system to my own students,” said Philippe Martin, an economics professor at Sciences Po and one of the reports authors. And the current system of fines and penalties for countries violating the Stability and Growth Pact, he added, “arent credible because they are never enforced.”

Instead of focusing on budget deficits, the authors suggest that governments abide by a strict goal on spending — which should not increase faster than GDP, and even at a lower pace for over-indebted countries. That should be controlled by independent bodies and the penalty would come in the form of issuing so-called junior debt (i.e., with higher interest rates) that would be automatically restructured if the country later needed assistance from the ESM.

The third reform, which may prove the most controversial, would be to implement an overt legal mechanism for insolvent countries to restructure their debt — to avoid a repeat of the wasted time and improvisation that have marked successive episodes of the Greek debt drama since 2010.

The other three reforms suggested by the Franco-German economists are the creation of a fund that would help member countries deal with the most severe crises; the definition of a class of “safe assets” to allow banks to replace sovereign debt in their balance sheets; and a reform of eurozone institutions, to better delineate the responsibility of monitoring economic policies and that of sanctioning wayward governments.

The report comes at a time when talk about eurozone reform appears to have stalled, with two immobile governments in Paris and Berlin.

The report will likely be read with interest in French and German government circles, if only because of its signatories identities. On the French side they include Jean Pisani-Ferry, who was the main architect of Macrons presidential platform, and Martin, another former adviser to the current French president.

On the German side, the authors include Clement Fuest, the head of the IFO Institute for Economic Research, and Beatrice Weder di Mauro, a professor at the University of Mainz and a former member of the governments Council of Economic Experts.

The report comes at a time when talk about eurozone reform appears to have stalled, with two immobile governments in Paris and Berlin. The French government has been long on speeches but short on specific ideas, contributions or policy papers since Macron unveiled his European grand plan at the Sorbonne in Paris last September. On the other side, German parties are still talking about forming a government, although a significant step was made last week with the signing of a preliminary deal between Angela Merkels Christian Democrats and her would-be Social Democrat partners.

Into the void jump the economists, with a report predicated on the optimistic vision that governments and other European institutions can find the time and energy to implement a complex and detailed reform that would need the support of 17 other countries, on top of France and Germany.

Original Article

Related Articles

71 Comments

  1. I?¦ve been exploring for a little for any high quality articles or blog posts in this kind of house . Exploring in Yahoo I finally stumbled upon this web site. Reading this info So i am happy to express that I’ve a very good uncanny feeling I found out exactly what I needed. I such a lot indubitably will make sure to don?¦t fail to remember this website and give it a look regularly.

  2. When I initially commented I clicked the “Notify me when new comments are added” checkbox and now each time a comment is added I get several e-mails with the same comment. Is there any way you can remove me from that service? Many thanks!

  3. I haven’t checked in here for a while because I thought it was getting boring, but the last few posts are good quality so I guess I will add you back to my daily bloglist. You deserve it my friend 🙂

  4. I was wondering if you ever thought of changing the structure of your blog? Its very well written; I love what youve got to say. But maybe you could a little more in the way of content so people could connect with it better. Youve got an awful lot of text for only having 1 or two pictures. Maybe you could space it out better?

  5. Hello, Neat post. There’s an issue with your website in internet explorer, might check this… IE nonetheless is the marketplace chief and a large element of other people will omit your magnificent writing because of this problem.

  6. Most of whatever you articulate happens to be astonishingly accurate and it makes me wonder why I had not looked at this in this light previously. Your article truly did switch the light on for me as far as this subject matter goes. But at this time there is actually 1 factor I am not really too comfortable with and whilst I make an effort to reconcile that with the actual central theme of your point, permit me observe exactly what the rest of your visitors have to say.Very well done.

  7. Nice post. I learn something more challenging on different blogs everyday. It will always be stimulating to read content from other writers and practice a little something from their store. I’d prefer to use some with the content on my blog whether you don’t mind. Natually I’ll give you a link on your web blog. Thanks for sharing.

  8. Only wanna input on few general things, The website style and design is perfect, the subject matter is real wonderful. “To establish oneself in the world, one has to do all one can to appear established.” by Francois de La Rochefoucauld.

  9. Hi, Neat post. There’s an issue along with your website in internet explorer, might test this?K IE nonetheless is the marketplace leader and a good part of people will leave out your wonderful writing due to this problem.

  10. We stumbled over here different website and thought I may as well check things out. I like what I see so now i’m following you. Look forward to looking into your web page repeatedly.

  11. I was wondering if you ever thought of changing the layout of your blog? Its very well written; I love what youve got to say. But maybe you could a little more in the way of content so people could connect with it better. Youve got an awful lot of text for only having one or 2 images. Maybe you could space it out better?

  12. Greetings from California! I’m bored at work so I decided to browse your blog on my iphone during lunch break. I love the information you provide here and can’t wait to take a look when I get home. I’m surprised at how fast your blog loaded on my phone .. I’m not even using WIFI, just 3G .. Anyways, great blog!

  13. You made some decent points there. I looked on the internet for more info about the issue and found most people will go along with your views on this web site.

  14. Excellent post. I was checking constantly this weblog and I am inspired! Extremely useful information specifically the closing section 🙂 I maintain such information much. I was seeking this certain info for a very long time. Thanks and good luck.

  15. You actually make it appear really easy together with your presentation however I in finding this topic to be actually one thing which I think I might never understand. It seems too complicated and extremely wide for me. I am having a look forward in your next submit, I will try to get the hang of it!

  16. I have been browsing online more than 3 hours today, yet I never found any interesting article like yours. It’s pretty worth enough for me. Personally, if all web owners and bloggers made good content as you did, the net will be a lot more useful than ever before.

  17. Can I simply say what a aid to find somebody who truly knows what theyre talking about on the internet. You definitely know how you can carry a problem to light and make it important. More folks have to learn this and perceive this aspect of the story. I cant believe youre no more common since you definitely have the gift.

  18. Pretty section of content. I just stumbled upon your website and in accession capital to assert that I acquire actually enjoyed account your blog posts. Any way I will be subscribing to your augment and even I achievement you access consistently quickly.

  19. Good day! I could have sworn I’ve been to this web site before but after looking at many of the posts I realized it’s new to me. Anyways, I’m definitely delighted I stumbled upon it and I’ll be bookmarking it and checking back frequently!

  20. Terrific paintings! That is the kind of info that are supposed to be shared around the internet. Shame on Google for now not positioning this post higher! Come on over and consult with my website . Thanks =)

  21. I got what you intend, regards for putting up.Woh I am glad to find this website through google. “Don’t be afraid of opposition. Remember, a kite rises against not with the wind.” by Hamilton Mabie.

  22. Somebody essentially help to make seriously posts I would state. This is the very first time I frequented your website page and thus far? I surprised with the research you made to create this particular publish incredible. Fantastic job!

  23. Hey There. I found your blog the use of msn. This is a very well written article. I’ll be sure to bookmark it and come back to read extra of your helpful information. Thank you for the post. I will definitely comeback.

  24. I do agree with all the ideas you’ve presented in your post. They’re very convincing and will definitely work. Still, the posts are too short for starters. Could you please extend them a bit from next time? Thanks for the post.

  25. I love your blog.. very nice colors & theme. Did you create this website yourself? Plz reply back as I’m looking to create my own blog and would like to know wheere u got this from. thanks

  26. Hello! This is kind of off topic but I need some guidance from an established blog. Is it difficult to set up your own blog? I’m not very techincal but I can figure things out pretty quick. I’m thinking about making my own but I’m not sure where to begin. Do you have any ideas or suggestions? Appreciate it

  27. Its like you read my mind! You appear to grasp so much approximately this, such as you wrote the guide in it or something. I think that you simply can do with a few percent to force the message home a bit, but instead of that, this is magnificent blog. A fantastic read. I’ll definitely be back.

  28. Hi there, just became alert to your blog through Google, and found that it’s really informative. I am gonna watch out for brussels. I will appreciate if you continue this in future. A lot of people will be benefited from your writing. Cheers!

  29. It’s a pity you don’t have a donate button! I’d definitely donate to this fantastic blog! I guess for now i’ll settle for book-marking and adding your RSS feed to my Google account. I look forward to new updates and will talk about this website with my Facebook group. Chat soon!

  30. Nearly all of whatever you mention is astonishingly legitimate and it makes me wonder the reason why I hadn’t looked at this in this light previously. This article really did switch the light on for me as far as this particular subject matter goes. But there is one particular issue I am not necessarily too comfortable with so while I attempt to reconcile that with the core idea of the point, let me see exactly what the rest of the readers have to say.Well done.

  31. My husband and i were very more than happy Louis managed to conclude his reports from your precious recommendations he made out of your web site. It is now and again perplexing to just continually be freely giving facts that many men and women may have been making money from. And we grasp we have the website owner to appreciate for that. Those explanations you’ve made, the straightforward site menu, the relationships you can help instill – it’s got mostly exceptional, and it’s really aiding our son in addition to us reckon that that theme is excellent, and that is especially mandatory. Thanks for the whole thing!

  32. Very nice post and straight to the point. I don’t know if this is truly the best place to ask but do you guys have any thoughts on where to employ some professional writers? Thanks in advance 🙂

  33. The heart of your writing while appearing reasonable originally, did not settle very well with me personally after some time. Someplace throughout the paragraphs you managed to make me a believer but just for a short while. I however have a problem with your jumps in logic and you would do nicely to help fill in all those breaks. In the event you actually can accomplish that, I could surely be amazed.

  34. Hi, I think your site might be having browser compatibility issues. When I look at your blog site in Ie, it looks fine but when opening in Internet Explorer, it has some overlapping. I just wanted to give you a quick heads up! Other then that, very good blog!

  35. I have been surfing on-line more than 3 hours today, yet I never discovered any interesting article like yours. It is pretty worth sufficient for me. In my view, if all webmasters and bloggers made good content material as you probably did, the internet shall be a lot more useful than ever before.

  36. I’ve been surfing online greater than 3 hours as of late, yet I by no means found any interesting article like yours. It’s lovely value enough for me. In my opinion, if all website owners and bloggers made good content as you did, the net will probably be a lot more useful than ever before.

  37. hey there and thank you for your info – I have definitely picked up something new from right here. I did however expertise several technical points using this website, as I experienced to reload the web site lots of times previous to I could get it to load correctly. I had been wondering if your web host is OK? Not that I am complaining, but slow loading instances times will very frequently affect your placement in google and could damage your high-quality score if ads and marketing with Adwords. Well I’m adding this RSS to my e-mail and could look out for a lot more of your respective exciting content. Make sure you update this again very soon..

  38. Merci pour les beaux court article . Je été enquêter ce sujet pour un jour . Les produits et caractéristiques que vous montrez , je n’étais pas au courant. Je serai suivant votre site Web maintenant et idéalement vous ferez beaucoup plus Idées et idées.

  39. Ich konnte nicht Ihre Website vor verlassen, um anzudeuten, dass ich extrem die standardmäßigen Informationen genossen habe, die eine Person Ihren Besuchern zur Verfügung stellt ? Kommt wird oft zurück sein um nach neuen Posts zu sehen

  40. Hallo! Wissen Sie, ob sie Plugins zur Hilfe bei der Suchmaschinenoptimierung herstellen? Ich versuche, mein Blog für einige zielgerichtete Keywords zu platzieren, aber ich sehe keine sehr guten Erfolg. Wenn Sie etwas wissen, teilen Sie es bitte mit. Kudos!

  41. Simply desire to say your article is as astonishing. The clarity in your post is simply cool and i can assume you are an expert on this subject. Fine with your permission let me to grab your RSS feed to keep up to date with forthcoming post. Thanks a million and please continue the enjoyable work.

  42. Please let me know if you’re looking for a author for your site. You have some really good posts and I believe I would be a good asset. If you ever want to take some of the load off, I’d love to write some content for your blog in exchange for a link back to mine. Please shoot me an email if interested. Thank you!

  43. A formidable share, I just given this onto a colleague who was doing a bit of evaluation on this. And he actually purchased me breakfast as a result of I found it for him.. smile. So let me reword that: Thnx for the deal with! However yeah Thnkx for spending the time to discuss this, I really feel strongly about it and love studying extra on this topic. If doable, as you develop into expertise, would you mind updating your weblog with more details? It’s extremely useful for me. Large thumb up for this weblog post!

  44. Hello There. I discovered your weblog the usage of msn. That is an extremely smartly written article. I will make sure to bookmark it and come back to read more of your useful info. Thanks for the post. I will definitely return.

Leave a Reply

Your email address will not be published.

Business

France and Germany agree on eurozone reform

PARIS — Governments talk a lot about eurozone reform but cant get their act together. So its time for academics to step in.

That impatience seems to be at the core of an unprecedented initiative by French and German economists, who published Wednesday a detailed plan on how to make the monetary union shock-resistant and a better guarantor of long-term prosperity.

Fourteen influential scholars, who in September published a joint op-ed in Le Monde and the Frankfurter Allgemeine Zeitung to urge their respective governments to be bold on reforming the monetary union, have taken a step further to detail what they think should be done — and the sooner the better.

The basic idea underlining their plan — which came in the form of a “policy insight” jointly published in Paris and Berlin — is that France and Germany may well be separated by historical and cultural differences in their approach to monetary union, but both make strong arguments. The plan is given extra weight because the German authors are more varied than the usual center-left academics traditionally sympathetic to French arguments.

There is no time to waste, the economists argue, because no one knows when the next financial crisis will hit.

In a nutshell, the eurozone needs both financial discipline — as the Germans argue — and risk-sharing — as the French insist on. But both need to be credible, and must stop relying solely on either strict rules that cant be enforced, or government promises that cant be kept.

Furthermore, there is no time to waste, the economists argue, because no one knows when the next financial crisis will hit, and even though the economy is recovering at a brisk pace, the eurozone remains vulnerable.

The report seems to make a point to skirt around the terms in which the eurozone debate has been framed in the last few months, notably by French President Emmanuel Macron who has pushed for grand reforms including the creation of a eurozone finance minister who would manage a “common budget.”

Neither a finance minister nor a joint budget are mentioned in the paper because, according to one of the authors, Agnès Bénassy-Quéré, “that is not a crucial question” for the monetary union. Another of the headline reforms for the single currency bloc — the German idea of transforming the bailout fund known as European Stability Mechanism (ESM) into a full-fledged and strictly independent “European Monetary Fund” — is similarly discarded.

Instead of highly charged words that may encounter political obstacles, the 14 economists suggest six major economic reforms that they argue should be undertaken simultaneously and without waiting — although the actual debates, votes and implementation of the package would have to be spread over several years.Read More »

Related Articles

Leave a Reply

Your email address will not be published.

Back to top button