EU Austerity Measures: Why The Nobel Peace Prize Matters

By Vivien Schmidt and Cornel Ban

In receiving the Nobel Peace Prize, the leaders of the European Union should not only take a moment to feel justifiable pride in the recognition of the EU’s past accomplishments, but they should also take a moment to reflect on what they’re doing today in the midst of the Eurozone crisis that may undermine that very achievement.

The Nobel Committee justifiably gave the award based on the Union’s contributions to peace, human rights and democracy. Since the 1950s the economic, political and cultural integration of Europe has made inter-state war unthinkable. The suggestion that Germany could go to war with France, Britain or Greece would extract from no more than a good laugh from today’s average European. Other dangerous tensions, such as those between Romania and Hungary, are now relegated to the history books; and this too is in large part due to European integration.

Continue reading on WBUR.org “Cognoscenti” 10/18/12

Can the EU Bicycle Turn into a Jet Plane by 2020?

As part of the EuroFuture paper series, the German Marshall Fund of the United States (GMF) is releasing a paper “Can the EU Bicycle Turn into a Jet Plane by 2020?,“ by Vivien A. Schmidt, the Jean Monnet Chair of European Integration at Boston University.

Schmidt explains that the theory goes that the EU only moves forward in a crisis, and that it must do so for the “bicycle” (that the EU is seen to be) not to fall. But in order for the EU to continue to move forward, its leaders need to turn that bicycle into an airplane, to give flight to their imaginations about what the EU could and should be and do. Rather than mechanics as its means of locomotion, the EU needs aerodynamics to make its increasingly complex interdependence work successfully. She proposes two scenarios, based on the assumption that the eurozone will move towards closer economic and political integration:

Deep economic and political integration that produces a flourishing EUtopia; or shallow economic and political integration that produces a stagnating dystopiEU.

The EuroFuture paper series features strategists from around the world who will analyze how their country or region will position itself vis-à-vis a changed Europe. GMF in-house experts will also explore the implications of the crisis through different national and regional prisms.

For more information about the EuroFuture paper series, please contact Thomas Kleine-Brockhoff or Javid Ahmad.

Eurozone Crisis Reveals Lack of Clear Leadership

Most of the attention to the eurozone crisis in the business pages of US newspapers is on economics. Will eurozone countries default on their debt? Are the spreads on debt too high to be sustainable? Are the banks the real risk? Will the euro break up with a Greek exit? Or will it be Germany?

All good questions, but they miss the point. The real problems for the EU are political, and speak to a crisis of leadership.

The eurozone is one of the biggest economies in the world. Its economic fundamentals, taken as a whole, are arguably better than those of the United States. And its prospects are no worse than those of the United States over the long term — so long as it manages the short term effectively.

What it lacks are the institutions, mechanisms, and resources that the US government has at its disposal to stabilize the economy.

EU leaders recognize the political limits to the eurozone, but have done little to remedy them. They have at various junctures discussed, but rejected, allowing the European Central Bank to act as a lender of last resort, like the Federal Reserve; sharing responsibility for debt through some form of eurobonds, akin to Treasury bills; and creating a European Monetary Fund with serious resources, akin to a regional IMF.

Instead, they have only agreed to small steps, such as creating a Banking Resolution Facility, a fund to bail out banks, and a deposit insurance program, similar to the US Federal Deposit Insurance Corp. At the same time, European leaders have held onto counterproductive pacts, including the “Fiscal Compact,” which sets targets for debt and deficits and demands rapid and radical deficit reduction. These have only pushed Portugal, Spain, Italy, and certainly Greece deeper into recession and made it more difficult for them to repay their debt

The problem for the EU is that it has lacked the common political will to do what is necessary. Germany in particular has been a stumbling block.

Germany is the country most insistent on the need for more “political union” but it has suggested little to achieve it beyond rapid, radical deficit reduction. The moves to authoritarian extremes on the right in Hungary and on the left in ­Romania — which stem from similar, harsh austerity programs begun in 2008 — should be an object lesson on the problems with such policies.

But will the EU take all, or at least some, of the economic measures mentioned above? So far, there are few signs of this. Such steps would require real leadership and a lot of trust among eurozone member-states and their citizens.

It might be useful to remind Europeans, and Germans in particular, that bad things happen in bad economic times. (See World War II.) Even if rescuing member states from bad times might cost a lot today, it would be infinitely less costly than allowing economic problems to fester. Although a eurozone breakup is still a remote possibility today, who knows about tomorrow, particularly if leaders fail to take the bold measures necessary.

This article appeared in the Boston Globe on Sunday, July 22, 2012. [Link to article]

Copyright 2012 The New York Times Company

Vivien Schmidt on Bloomberg Television

Berlusconi: End of an Empire (video link)

(Bloomberg) — Vito Tanzi, former director of fiscal affairs at the International Monetary Fund, Maurizio Viroli, a professor at Princeton University, Ruth Santini, associate fellow at the Brookings Institution and Vivien Schmidt, professor of international relations at Boston University, talk with Bloomberg’s Sara Eisen about former Prime Minister Silvio Berlusconi, his impact on Italy’s economy and political environment, and the outlook for the European debt crisis. Bloomberg’s David Tweed also speaks. (Source: Bloomberg)

© Copyright 2011 Thomson Reuters

Vivien Schmidt on NPR’s “On Point” with Tom Ashbrook

Greeks on a Teetering Greece

[Listen to program on WBUR]

We bring in the Greeks to talk about what’s ahead as their country teeters.

It’s all about the Greeks in Europe this week, and really around the world.  The Greeks’ debt.  The Greeks’ crisis.  The Greeks’ stunner of a sudden conversation about voting on whether or not to accept their own bail-out from Europe and the pain that would come with it.

The “hemlock ballot,” wags called it – and it’s off, apparently, already.  Greece got in way over its head on debt and spending.  Now it’s in a world of hurt and struggling over how to respond.  In the Euro-zone, or out. In the streets, or off.

This hour On Point: we talk with Greeks about their close encounter with Greek tragedy, and ours.

-Tom Ashbrook

Guests

Yanis Varoufakis, Professor of Economics, University of Athens, and author of The Global Minotaur: The true causes and nature of the current economic crisis.

Naya Kotsira, she is a civil servant who handles hiring and firing at Greece’s ministries.

John Psaropoulos, Greece correspondent for National Public Radio.

Vivien Ann Schmidt, Professor of European Integration at Boston University, where she is also Director of the Center for International Relations and Director of the Center for the Study of Europe

© Copyright 2011 WBUR