Experts warn that if European policy makers fail to institute major changes to the monetary union of the EU, the system will not survive the next major financial collapse, according to a report by Jacques Delors Institute.
Jacques Delors was one of the chief architects of the euro and his policy institute released the report on September 19.
The report comes out at a time when even EU supporters caution against closer monetary union as a response to the June 23 Brexit vote, Reuters reports. (RELATED: Economists Weigh In On Great Britain’s Fate After Brexit, Say It’s Not Looking Good)
“Europe will be hit by a next economic crisis. We do not know whether this will happen in six weeks, six months or six years. But we fear EMU [European monetary union] will be ill-prepared for such a crisis,” the report states. The authors continue by acknowledging that, “reforming the euro might not be popular. But it is essential and urgent.”
Experts worry, however, that pushing for monetary reform could exacerbate the growing public disapproval of the EU after suffering multiple economic woes over the past decade. Polling numbers show just how prevalent the unfavorable views of the EU are within Europe.
Germany’s favorability rating of the EU fell 8 percent, France’s fell 31 percent, and Italy’s fell 20 percent over the last decade, according to Gallup.
“We know that there is a lot of skepticism” among citizens concerning the European experiment, the authors explain. “But this skepticism will not have helped us when the next crisis hits … Why wait for the next crisis to find out? The euro must be protected today,” the authors state.
Despite the rampant skepticism, the authors provide a three part plan to reform the euro that they believe to be political viable.
The first part of the plan involves “quick fixes,” that include, “a reinforcement of the European Stability Mechanism (ESM), a further strengthening of the Banking Union and better economic policy coordination under improved democratic control.”
The second portion of the plan is to ensure that the European monetary union experiences greater “convergence and growth.” To accomplish this, the authors say the EU needs to institute a “focused structural reform agenda with a comprehensive investment initiative.”
The final piece involves the creation of lasting economic and monetary union within the EU. This would require a foundation built upon “significant risk sharing and sovereignty sharing within a coherent and legitimate framework of supranational economic governance.” Essentially, the third prong of the solution involves turning the European experiment, now a confederation, into a federal system similar to the United States.
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