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Chapter 4: Restoring Convergence between Member States in the EU and EMU
growth) as well as the absence of a adjustment channels and consider still much room to improve employ-
fiscal capacity at EMU level that would changes in socioeconomic factors and ment and productivity growth, notably
help to stabilise national economies cross-border effects (both stemming by supporting human capital develop-
-
in the face of asymmetric tempofrom labour markets) that may influ - ment and providing the right incentives
rary shocks. ence the depth and persistence of an for employment growth.
economic downturn, as well as the
In that respect it has become clear that adjustment capacity of any given econ- At the European level, a range of spe-
the further integration of the national omy. The analysis suggests in particular cific proposals are being discussed in
economies that is going to occur in the that in a monetary union, in the face of the public domain in order to speed up
future is likely to strengthen cross-bor- nominal and real rigidities, macro-eco- and strengthen the return to a path of
der economic relationships between EU nomic shocks may have a strong adverse long-term convergence, notably includ-
Member States, which, while improving impact on employment and social cohe- ing: strengthening mobility; investing in
their overall productivity performance sion if adjustment is left solely to mar- human capital; and introducing more
through specialisation and competi- ket mechanisms, with potentially adverse common benchmarks. In a long-term
tion, will, for countries in the euro area, hysteresis and cross-border effects. perspective, a well-designed fiscal
limit their capacity to stabilise their capacity at the level of the EMU could
national economy and promote sus - … a strengthening of be particularly effective, especially
tainable growth in the face of asym- national reforms and of the when combined with other wide-rang-
metric shocks. socioeconomic dimension of ing structural reforms.
European cooperation
In this context, the ongoing debate con- The incoming European Commission
tinues regarding the most appropriate Actions at both the national and Euro- President Juncker announced his inten-
ways to complement the ambitious pean level can foster stronger upward tion to promote initiatives to deepen
reforms already undertaken with fur- socioeconomic convergence in the EU. the EMU, including proposals to encour-
ther reforms aiming to create a euro age further structural reforms, if nec-
area banking union, deepening the fiscal In particular, reforms in national-level essary through additional financial
and economic union, strengthening its employment and social protection sys- incentives and targeted fiscal capac-
87
social dimension, and creating a genu- tems can make them more responsive ity at the euro-area level ( ). For the
ine political union (see, for instance, to the economic cycle and thereby con- longer term, to restore convergence,
European Commission 2012). tribute to the stabilisation of aggregate the Blueprint for a Deep and Genuine
88
demand in the face of a temporary Economic and Monetary Union ( ) con-
In this process it has become increas- shock, while strengthening conver sidered the creation of an EMU-wide
-
ingly clear that there is a need to look gence and mitigating adverse labour fiscal capacity with an unemployment
beyond the traditional macro-economic market hysteresis effects. There is also based system as an option.
87
( ) See Juncker (2014).
88
( ) See European Commission (2012b) and
the mission letter of V. Dombroskis notably
mentioning the pursuit of the ‘work of the
“Four Presidents’ report” and the Commission
Blueprint for a Deep and Genuine Economic
and Monetary Union, integrating the social
dimension’.
233
growth) as well as the absence of a adjustment channels and consider still much room to improve employ-
fiscal capacity at EMU level that would changes in socioeconomic factors and ment and productivity growth, notably
help to stabilise national economies cross-border effects (both stemming by supporting human capital develop-
-
in the face of asymmetric tempofrom labour markets) that may influ - ment and providing the right incentives
rary shocks. ence the depth and persistence of an for employment growth.
economic downturn, as well as the
In that respect it has become clear that adjustment capacity of any given econ- At the European level, a range of spe-
the further integration of the national omy. The analysis suggests in particular cific proposals are being discussed in
economies that is going to occur in the that in a monetary union, in the face of the public domain in order to speed up
future is likely to strengthen cross-bor- nominal and real rigidities, macro-eco- and strengthen the return to a path of
der economic relationships between EU nomic shocks may have a strong adverse long-term convergence, notably includ-
Member States, which, while improving impact on employment and social cohe- ing: strengthening mobility; investing in
their overall productivity performance sion if adjustment is left solely to mar- human capital; and introducing more
through specialisation and competi- ket mechanisms, with potentially adverse common benchmarks. In a long-term
tion, will, for countries in the euro area, hysteresis and cross-border effects. perspective, a well-designed fiscal
limit their capacity to stabilise their capacity at the level of the EMU could
national economy and promote sus - … a strengthening of be particularly effective, especially
tainable growth in the face of asym- national reforms and of the when combined with other wide-rang-
metric shocks. socioeconomic dimension of ing structural reforms.
European cooperation
In this context, the ongoing debate con- The incoming European Commission
tinues regarding the most appropriate Actions at both the national and Euro- President Juncker announced his inten-
ways to complement the ambitious pean level can foster stronger upward tion to promote initiatives to deepen
reforms already undertaken with fur- socioeconomic convergence in the EU. the EMU, including proposals to encour-
ther reforms aiming to create a euro age further structural reforms, if nec-
area banking union, deepening the fiscal In particular, reforms in national-level essary through additional financial
and economic union, strengthening its employment and social protection sys- incentives and targeted fiscal capac-
87
social dimension, and creating a genu- tems can make them more responsive ity at the euro-area level ( ). For the
ine political union (see, for instance, to the economic cycle and thereby con- longer term, to restore convergence,
European Commission 2012). tribute to the stabilisation of aggregate the Blueprint for a Deep and Genuine
88
demand in the face of a temporary Economic and Monetary Union ( ) con-
In this process it has become increas- shock, while strengthening conver sidered the creation of an EMU-wide
-
ingly clear that there is a need to look gence and mitigating adverse labour fiscal capacity with an unemployment
beyond the traditional macro-economic market hysteresis effects. There is also based system as an option.
87
( ) See Juncker (2014).
88
( ) See European Commission (2012b) and
the mission letter of V. Dombroskis notably
mentioning the pursuit of the ‘work of the
“Four Presidents’ report” and the Commission
Blueprint for a Deep and Genuine Economic
and Monetary Union, integrating the social
dimension’.
233
