Tag Archives: EU

European Unity and the Principle of Unity of Liability and Control

In its recent special report entitled „Consequences of the Greek Crisis for a More Stable Euro Area,“ the German Council of Economic Experts has stressed the dangers due to institutional deficiencies and discretionary decision making in the Euro area. The executive summary concludes with the statement:

The institutional framework of the single currency area can only ensure stability if it follows the principle of unity of liability and control. Reforms that stray from this guiding principle plant the seeds of further crises and may damage the process of European integration.

See also my earlier contributions here and here.

“Institutionelle Schwächen der EU (Institutional Problems in the EU),” FuW, 2015

Finanz und Wirtschaft, July 15, 2015. PDF. Ökonomenstimme, July 16, 2015. HTML.

The collapse in Greece is a consequence of major institutional problems:

  • Political decision makers in Berlin, Paris, Brussels, Frankfurt and Washington didn’t follow the rules. This seemed optimal ex post, but is suboptimal ex ante (see Kydland and Prescott).
  • The ECB’s mandate is unclear.
  • The monetary system is fragile.

Last Exit Before Grexit?

Nicolai Kwasniewski reports in Der Spiegel about the last (?) chance for Greece to avoid Grexit.

  • By Wednesday night, Greece has to submit a request for an ESM program.
  • After discussing the request, Euro finance ministers will ask the “institutions” to evaluate it and to assess whether the stability of the Euro zone is under threat (a prerequisite for ESM funding), the program is sustainable etc.
  • Greece has to submit detailed reform proposals until Thursday. To be acceptable, they will have to satisfy stricter requirements than those the Greek voters recently rejected.
  • Euro finance ministers will evaluate the proposals on Saturday.
  • EU prime ministers and presidents have the last word on Sunday.

Peter Spiegel, Anne-Sylvaine Chassany and Duncan Robinson report in the FT.