Wednesday

17th Aug 2022

Opinion

Eurozone needs institutional reform

  • The eurozone can no longer function as it is today (Photo: guysie)

One year before the European elections in May 2019, the eurozone is facing a series of challenges related to its architecture and its structural weaknesses.

The current fiscal policy framework is ineffective, as it has strengthened social and regional disparities and increased fiscal gaps between the periphery and the powerful European North.

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Public investments are not increasing, tight fiscal policies are still resisting against the promotion of a robust growth model, and despite the relative stabilization and growth that eurozone has shown over the last couple of years, the roots and causes of the 2008 financial crisis have not been fully addressed.

The crisis in Italy is coming to intensify the pressure on institutional reform, for which we have heard a lot, but we have seen little.

The delay in pushing for the necessary changes in Eurozone architecture is not just worrying but it may further enhance the eurosceptic and populist bloc and further exacerbate the already intense disappointment of a large part of European citizens over the implemented policies.

In this context, there are also positive developments.

The new socialist government in Spain, led by Pedro Sanchez, the Costa government in Portugal and the Tsipras government in Greece are three very interesting progressive political projects.

All three leaders are attempting to reshape the political balances in the EU and eurozone and to step up efforts towards achieving sustainable development, social and regional convergence.

The key initiatives and proposals of the progressive bloc at the European Council and the European Parliament focus on changing the fiscal policy priorities and protecting the weaker social groups, while at the same time increasing the resources of the European budget, pushing for tax harmonisation, strengthening cohesion policies, addressing social inequalities, improving burden-sharing and risk management within the Eurozone.

No more neo-liberalism

To put it simply, these forces are against the neo-liberal austerity policies, and the extreme populism and far-right euroscepticism that has grown during the recent years in many member-states.

It is, thus, important for the eurozone to choose its direction and decide on its next policy path.

Dilemmas are specific, risks are imminent, as imminent are the proposals of each side. The proposals of Tsipras, Costa and Macron are moving towards convergence and can be considered as positive, while Merkel does not want to change the existing balance of power and alter the substance of the current fiscal policies.

The eurozone can no longer function as it is today.

Both the examples of Greece and Italy test the limits of a system with inherent weaknesses that feeds internal gaps, strengthens deficits and debts in the European South, and surpluses in the European North respectively.

Therefore, we have to change course, as we will find ourselves for another time confronted with everything that has led Europe to the financial crisis ten years ago.

Such a negative development would be painful for our societies and the European project altogether.

Dimitris Papadimoulis is vice-president of the European Parliament, and head of Syriza party delegation

Disclaimer

The views expressed in this opinion piece are the author's, not those of EUobserver.

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