Mario Tonveronachi
University of Siena, Italy
The Global Economy in a Time of Uncertainty:
Capitalist trajectories and progressive alternatives
Conference organised by Ideas, Muttukadu, India, January 24-26, 2012

 The institutional design: add pre-entry convergence and post-entry consistency to national sovereignty
 Requirements: correct sets of pre-entry and post-entry rules and their enforcement
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Wrong sets of rules and lack of enforcement
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Pre-entry lack of enforcement: non-complying countries into the euro
 Pre-entry insufficient rules: admittance of countries with dodgy accounting and evident macroeconomic imbalances
 Post entry lack of enforcement of fiscal discipline
 Post entry lack of enforcement of common non-lax financial supervisory practices
 Post entry divergent national policies
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 The result: increasing structural divergences in the real and financial sectors
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 A medium-long term credible design, also necessary as reference for short-term adjustments
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Presently, no room for a profound revision of the EU Treaties
 Room of manoeuvre given by the Treaties:
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Political and policy discretion at EU and national level
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Public investment
Current-account symmetric adjustments
 Limits posed by existing EU Treaties: non-bail out clause and limited scope by ECB on public debts
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New agreements are permitted for more stringent rules, but not for weaker ones
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Economic Governance
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Procedure: European semester
Content: Coordination of National Programmes on Stability (fiscal sustainability) and Reform (growth)
Rules:
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Six pack: stronger enforcement of fiscal rules and surveillance on macroeconomic imbalances
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Fiscal compact: constitutional 0.5% max structural deficit rule + 1/20 debt rule
Growth is reduced to the correction of imbalances so that the solution of multiple equilibria goes towards deflation
Firewall:
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ESM, a European fund to finance illiquid governments, to manage in collaboration with the IMF
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Financial governance
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New institutional framework for financial regulation and supervision
 National supervisors retain crucial discretion
 The link between sovereign and financial crises was not severed
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Add a Growth Compact with the same level of enforcement as the
Fiscal Compact
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Framework of Europe 2020: employment, innovation, education, social inclusion and climate/energy
 Expand existing programmes (e.g. EU flagship initiatives) and use flexibilities to insert growth initiatives into the European Semester
Add a Growth European Fund to the ESM
 Problems:
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Enforcement
Funding
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