tribune. The euro has turned twenty this year. This anniversary is an opportunity to reflect on the robustness of its economic governance. The global financial crisis of 2008 and the 2010-2012 euro debt crisis revealed that our Economic and Monetary Union (EMU) was not prepared for a major recession related to financial turmoil. Since then, much has been done in institution building.
In particular, we completed the first stage of the banking union by establishing a single supervisor and common rules and funds for bank resolution. We have a European stability mechanism that could intervene in sovereign crises by providing loans to countries in difficulty.
A stronger foundation
The reform process is incomplete, however. Many of the problems identified during the last crisis will reappear in a future crisis. Key grievances remain unanswered. The countries that have suffered the most from the crisis feel that austerity has been imposed on them, that the euro zone still does not offer safety nets and that it penalizes their banks and their companies, for whom access to credit is relatively expensive. Creditor countries, for their part, feel they live in a system that does not enforce the rules and exposes them to potential and opaque budget liabilities.
Countries that have suffered the most from the crisis feel that austerity has been imposed on them
The euro is an important pillar of the European Union (EU). A return to national currencies, in the context of a globalized capital market, would create instability that would expose the small open economies of EMU to high financial volatility and painful adjustments to adverse shocks. But to reap the benefits of the common currency, we must give it a stronger foundation. It's urgent.
With this motivation, the Center for European Policy Research (CEPR) set up an independent working group of renowned academics and policy experts to discuss and design next steps. Its members represent different countries and defend different perspectives, but they share a common conviction: a research-based debate will allow us to converge on a reform agenda that can inform and inspire the political process.