Report from the EUCRIS Jean Monnet Chair conference on eruozone reform

On June 6, 2018 the scientific conference entitled “Reforma strefy euro -co jest źle i jak to naprawić?" (Eurozone reform - what is wrong and how to fix it? ) was held at the Auditorium Maximum UJ in Krakow. The conference was organized by the Chair of Studies on Integration Processes of the Jagiellonian University under the Jean Monnet Chair EUCRIS project, whose head is prof. Janusz Węc. The aim of the conference was to evaluate the assumptions and results of the eurozone reform from the legal, institutional and economics perspectives. Among other issues discussed during the conference were the impact of the mentioned reform on the Poland’s status in the EU and what position should Poland adopt on this matter.

The conference was inaugurated by prof. dr hab. Zdzisław Mach, Dean of the Faculty of International and Political Studies and dr hab. Adrian Tyszkiewicz, Deputy Head for General Affairs of the Institute of Political Studies and International Relations.

During the first panel prof. dr hab. Janusz Węc (Jagiellonian University), dr hab. Tomasz Kubin (University of Silesia in Katowice) and Dr. Adam Kirpsza (Jagiellonian University) discussed the consequences of decisions aimed at minimizing the economic crisis in the euro area after 2008, as well as institutional and legal aspects of strengthening the Economic and Monetary Union in the perspective of 2025. The speakers also presented the impact of the case law of the EU Court of Justice on the reform of the euro area. It was pointed out that the debt crisis in the eurozone has exposed other weaknesses, i.e. the lack of closer coordination of financial, fiscal and economic policies, with full communitarisation of monetary policies. Moreover since the Maastricht Treaty neither the Financial Union, nor the Fiscal Union and the Economic Union haven’t been established in addition to  the Monetary Union. As a result, the Stability and Growth Pact since its adoption in 1997 has been repeatedly violated. After the outbreak of the debt crisis, it was decided to supplement the Monetary Union with three new structures: the Financial Union, the Fiscal Union and the Economic Union, which were to be created until 2025. The rules for their establishment were defined, among others in the Van Rompuy’s package of December 12, 2012, the Five Presidents’ Report of June 22, 2015, the White Paper of the EC of March 1 2017, the EC Reflection Report of May 31, 2017 and the EC road map of December 6, 2017. However, the implementation of all the objectives of the euro area system reform initiated in 2012 has hitherto been hindered by differences of position between the member states of the eurozone and diverging views between the European Commission and governments on the principles of constitution of the Banking Union, Capital Markets Union, Fiscal Union or Economic Union. During the panel, it was also indicated that the three most important priorities for 2018-2019 will be the establishment of a common backstop for the Single Resolution Mechanism's, adoption of provisions determining the European Deposit Guarantee Scheme and the creation of a European Monetary Fund to replace the European Stability Mechanism operating since 2012.

In the second panel the speakers were: prof. dr hab. Andrzej Wojtyna (Cracow University of Economics), prof. dr hab. Katarzyna Żukrowska (Warsaw School of Economics) and Dr. Piotr Stanek (University of Economics in Krakow). In their speeches, they focused on presenting the impact of the reform of the euro area on the level of macroeconomic stability in the EU Member States. They also presented the results of empirical research showing how participation in the euro area affects the stability of public debt. Among the problems of the eurozone they mentioned still existing risk of disturbing the macroeconomic stability of the Economic and Monetary Union. Despite the reforms, exceeding the safe level of public debt caused by, for example, an increase in public expenditure by the new government in Italy may contribute to a similar situation as in 2008. Among other problems that EMU states must face is limited competitiveness of their economies. This is particularly evident in the case of countries such as Greece, Ireland, Portugal, Spain and Italy (the so-called GIPSI countries). After the crisis, the debt-to-GDP ratio in these countries increased and, despite recovery programs, remained at a high level.

Among the solutions to the abovementioned problems, the participants of the second panel indicated firstly that the euro area is still attractive especially for countries on the medium level of development. This is mainly due to the fact that accession to it may contribute to political stability and minimization of the costs of economic reforms. Secondly, the liberalization of the flow of services would help to improve the competitiveness of the European economy. Thirdly, in maintaining a permanent level of public debt or minimizing it to achieve a primary surplus, the existence of so-called debt rules is required. A positive impact on the fiscal sphere has also the EU's excessive deficit procedure.

The third panel ("Poland and the reform of the euro zone") was attended by Dr. Małgorzata Bonikowska (President of the Center for International Relations in Warsaw), Dr. Marcin Kędzierski (Cracow University of Economics) and Dr. Robert Mężyk (Humboldt Universität in Berlin, Australian National University in Canberra). The speeches referred to the significance of the euro for the process of political integration in the EU, the prospects of Poland joining the euro zone and how the new system of coordination of EU economic policies affects these plans, and what scenarios are for Poland in the future in connection with dynamic changes in the Economic Union and Currency. The introduction of the euro currency in 2002 established an important symbolic context that allowed the societies of the member states to identify themselves more with the idea of integration in Europe. Today, the euro is a political project that is in great difficulty. They are caused, among others due to growing imbalances in current accounts, growing trade and budget surplus of Germany as well as growing deficits of southern European countries. As a result, according to the panelists, one should expect a lot of pressure to create compensation mechanisms in the EU. In favor of such solution are France and Italy, whereas the Germans are reluctant to such a vision of the reform of EMU. Such differences may cause deep divisions in the euro area and eventually its decomposition. According to the speakers, Poland should make a political decision regarding its position on the euro area. However, no matter what this decision would be, Poland will be the subject to the coordination of economic policies in the EU. There is a process of clear organizational and functional link between the so-called memorandum of understanding and mechanisms (eg the European Stability Mechanism) which financially support the euro area countries.

The conference was the second one organized under the JMC EUCRIS project. The previous one took place in December 2017 and concerned the assessment of the effectiveness of the provisions of the Treaty of Lisbon in the context of EU crises. The report from this event can be found here.

Panel I: Eurozone reform - the institutional and legal perspective

Panel II: Eurozone reform - the economic perspective

Panel III: Poland and eurozone reform