Challenges ahead for the EU’s Economic Governance

By Ms Sara HURTEKANT

 

Ms Sara HURTEKANT, Junior Project Manager at the Development Office and former Academic Assistant in the International Relations and Diplomacy department, reflects in this interview about the challenges ahead for the EU’s Economic Governance and their connection with the EU’s external action. Sara has recently contributed to the book ‘The European Union’s Evolving External Engagement: Towards New Sectorial Diplomacies?’ by reflecting on this topic. More information about the book can be found here. Within our Executive Education offer, a course on EU Economic Governance takes place in October, and the topic is also tackled in the EU Diplomacy & Diplomatic Skills and the Intensive Seminar on the EU courses.

Which are, from your point of view, the key challenges for the EU’s Economic Governance in the coming years?

Personally, I believe that dealing with the aftermath of the European sovereign debt crisis will remain the key challenge for the upcoming years. During the height of this crisis in 2011 and 2012, the frenzy on financial markets was tackled with strong European policy initiatives such as the establishment of the European Stability Mechanism, the decisive action of the so-called Troika, the European Commission, the International Monetary Fund (IMF) and the European Central Bank (ECB), and the signature of the intergovernmental Treaty on Stability, Coordination and Governance, which requires its signatories to adjust their constitution to incorporate a balanced budget rule.

Whilst all these initiatives did achieve the objectives, to calm the financial markets and limit the budget deficits of the Euro area’s governments, there were some oversights in the creation of these initiatives due to the urgency of the required action. Now that the economy is flourishing and the sense of urgency has decreased; some inherent problems of these initiatives will resurface and should be dealt with.

An example of this is the increasing critique on the undemocratic nature of the Troika, which had a large hand in the debt-settlement of the Greek budget deficit. There are increased questions regarding the legitimacy of the Troika to intervene in the way it did since none of the involved institutions were democratically elected nor officially mandated. Clarifying and institutionalizing decisions and procedures so we can head on any potential future crisis with an extensive and efficient toolkit will be, in my view, the main challenge for Europe’s economic governance.

How do you think the changes in the EU’s economic and monetary policy have affected the external action of the EU?

I believe the European sovereign debt crisis and the policies implemented during these times had two major effects for the EU’s external action; on the one hand, the EU and the Euro area’s international image took a hit with the eruption of the crisis. On the international stage the EU proliferates itself as a large market of consumers with a strong currency; however, with the Eurozone in a recession and a currency under fire on the international markets it was more difficult to retain such an image.

On the other hand, the European sovereign debt crisis has altered the representation of the Euro area in international forums. Before the European sovereign debt crisis, countries outside of the European Union didn’t understand the need for the Euro area to be represented separately from the individual Member States in organizations such as the IMF and the G7, now there seems to be a bit of a shift to consider the needs of the Euro area as a separate entity, even though it still doesn’t have a dedicated seat at the negotiation table.

What was your main contribution to the book ‘The European Union’s Evolving External Engagement: Towards New Sectoral Diplomacies’?

The book is an edited volume in which several scholars use an analytical framework to investigate certain policy areas and in what way the EU engages externally in these policy areas. The book differentiates between three different types of policy areas: EU internal policies with a long-standing external engagement, EU internal policies with newly emerging external engagement and EU internal policies with rapidly evolving external engagement; my contribution to the book falls under the latter category. For me, researching the altered external engagement of the EU’s economic and monetary policy was of particular interest since the worldwide economic crisis of 2008 and the subsequent European sovereign debt crisis have not only drastically altered the EU’s internal acquis, but also the perception of the European Union and the euro area and its representation in international forums such as the G7, the IMF and the G20.

 

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