How Balanced Budget Rules Led to the Juncker Plan

By
Jean-Claude Juncker 2012-06-27 d
How Balanced Budget Rules Led to the Juncker Plan - Philip Schnattinger

Abstract

This article explores the rationale behind the 315 billion euro spending program of the European Union called the ‘Juncker Plan,’ and expands upon the analytical framework of McNamara in her 1998 book, "The currency of ideas." Policy elites believed that, at the member state level, Keynesian counter-cyclical fiscal expansion was an ineffective policy tool. This led directly to the creation of new budget rules for European Union member states under the European Semester and the Macroeconomic Imbalance Procedure (MIP). The Juncker plan is the product of the constraining institutions created before the shift towards Keynesian demand management -- which makes an expansionary fiscal policy at the Union level the logical path out of the crisis.

Introduction

"After years of fighting to restore our fiscal credibility …  Europe needs a kick-start and today the Commission is supplying the jump cables."
–Jean-Claude Juncker[1]

The institutional changes from the Euro Crisis set the Eurozone on a trajectory towards deeper fiscal integration. Due to the constraints put on the member states’ budgets, policy makers wanting to engage in Keynesian fiscal demand management have to elevate this policy tool from the national to the Union level, in order to comply with regulations. The Juncker Plan is a first step towards managing business cycles on a supranational level.

The 315 billion euro spending plan that the president of the Commission, Jean-Claude Juncker, proposed on 26 November marked a significant change in European policy. It is the first time that the Commission assumed responsibility for managing aggregate demand in the European economy. This paper reasons that the Juncker Plan and other similar initiatives for increasing public investment in the Eurozone are the consequences of changing ideas meeting new institutions.[2] There is an inherent link between the recent movements towards aggregate demand management by the European Union and the constraints that were put on member state budgets. These constraining institutions were created out of a neoliberal policy consensus in the first year of the crisis, and as ideas change, institutions persist. As Keynesian explanations of the Euro Crisis become more popular, the only way for policymakers to realize their Keynesian prescriptions is to move to a more integrated common fiscal policy and demand discretionary fiscal policies by the European Union.

According to McNamara, a neoliberal and monetarist policy consensus over the tasks of monetary policy are what originally enabled the creation of the European Monetary Union (EMU). At the beginning of European sovereign debt crisis, this consensus had been strengthened among European policymakers.[3] The neoliberal predictions of problems the Eurozone would face if governments ran fiscal deficits fit the actual economic data observed.  Under the existing regulations, indirect fiscal transfers through common risk-sharing are not allowed, and so constant fiscal deficits were predicted to lead to the failure of the euro.

The crisis convinced European policymakers that, in addition to the necessity of restrictive monetary policy and low inflation targets, a second supplementary measure to prevent fiscal deficits was necessary to guarantee the functioning of the Eurozone. As a result, member states created a newer and stricter framework of rules that aimed to prevent excessive borrowing.[4] Their solution was the Macroeconomic Imbalance Procedure (MIP). Rather than a mere addition to the Stability and Growth Pact (SGP), the rules of the MIP represent the institutionalization of European policymakers’ belief that all deficits of member state budgets are harmful. Keynesian demand management through fiscal expansion was judged to be an inadequate and ineffective policy tool on the national level. Furthermore, Keynesian stimulus was branded as a dangerous idea, which would increase the divide in the Eurozone and ultimately lead to its breakup.

However, as the Eurozone continues to struggle and the economic crisis persists, a Keynesian explanation for the problems of the European economy is finding increasing support. Policymakers are searching for a solution to improve the struggling European economy with a growing output gap due to member state austerity. This shifts the economic preferences of European states and enables new possibilities for cooperation. At the same time, adherence to the new institution of the MIP is almost unanimously accepted as necessary to keep sovereign borrowing costs low. This constrains the policy space, preventing a solution on the national level. As a result the only option that presents itself is transferring the competency of demand management through discretionary fiscal policies to the European level. This call for fiscal demand management at the European level is what is observed currently in the Eurozone, and the Juncker plan is part of this.

The Model: Ideas, Interests, and Constraining Institutions

The argument is built on a model that consists of the three pillars of comparative political economy: ideas, interests and institutions.[5] The model assumes that, when the Eurozone was struck by the financial crisis and the difficulties in financing sovereign debt evolved, a neoliberal and monetarist policy consensus dominated Europe. As noted previously, this argument has been convincingly defended by Kathleen McNamara.[6]

Based on these ideas, the member states pursued their perceived economic interests in their reactions to the crisis. Some member states saw their interests as being threatened by the prospect of having to pay for other member states’ debts. The obvious solution to prevent this problem from growing worse (and from arising again in the future) was the creation of stricter rules to prevent governments from creating debt. The Eurozone members accepted this as a reasonable policy thanks to the increasing acceptance of a new idea: that Keynesian discretionary fiscal policies to increase aggregate demand do not work, and actually harm the economy as they burden national budgets and increase national interest rates. As a consequence, the Europeans adopted the MIP, creating an institution that would prevent public deficit spending (the identified cause of the crisis) in the future.New institutions persist while ideas change, reshaping interests.[7] As the crisis in Europe continues and the output gap is growing (figure 3) Keynesian ideas have been enjoying increasing popularity. If Keynesian demand management is impossible on the national level, but seen as a preferable policy for the reviving Eurozone economy, then the solution is to increase spending at a different level. This leads to a redefinition of interests among European countries. Instead of preventing excessive government debt the question arises of how to increase spending given the existing constraints. The logical consequence is then to move fiscal demand management from the national to the European level.

The Crisis in the Eurozone and its Explanation

As the European Commission’s DG of Economics and Financial Affairs put it, “From late 2009 and early 2010, certain euro area countries were beginning to have problems financing their debts.”[8] As a result of the global financial crisis, public budgets were expanded for a countercyclical response. The insecurity of actors in the financial sector about the value of the assets (in the form of bonds) they were holding led to a reevaluation and a closer examination of the sustainability of the public debt of governments. Governments that were judged to face problems in the payment of their debts were Greece, Ireland, Spain, Italy and Portugal.

The Europeans analyzed this crisis in the light of the criticism that was voiced about the euro’s institutional weaknesses before the crisis. As many commentators expected, problems of excessive budget deficits and public overspending seemed to be materializing. These questions, which had always been an issue in European fixed exchange rate systems, were predicted to reappear after the crisis of the SGP in 2003. In this crisis France and Germany struck a deal to suspend fiscal deficit procedures against them.[9] The public reaction was for the SGP to be nullified.[10] However, in 2003, the predicted doomsday scenarios (which claimed that the euro would lose its value and the economy would crash as investors withdrew their funds from the Eurozone) didn’t materialize. It is unclear why financial markets didn’t react to the policy change, but fiscal expansion of national governments and the euro, as well as the government bond yields, remained stable. One explanation proposes that the agreement between governments and markets remained intact as markets asked for this increase in public spending. Another explanation, from the field of embedded intergovernmentalism, is that the credibility of the Eurozone wasn’t endangered, as the consensus of interest groups in the most powerful states (Germany, France, and Italy) remained intact.[11] The final negotiations after the breach of the SGP, much to the disappointment of the Commission, focused on revisiting, reforming or even abandoning the SGP without replacement, rather than complying with and strengthening budgetary oversight in the future.[12]

This changed rapidly when the European sovereign bond yields started to rise at the start of 2010. Germany suddenly was reminded of its original concerns about a currency union. The country had originally championed the SGP during the creation of the EMU in the 90s, since it feared that the historically profligate countries of the Mediterranean would destabilize the value of the currency unless they were restrained.[13] The Germans were worried that the political incentives to run unsustainable budget deficits for short-term political gains at the cost of rising interest rates for all would be too high in a monetary union. Only a strict obligation to maintain fiscal prudence could, in their view, prevent this from happening.[14] This fear now resurfaced in German society. Under no circumstances did the German public want an indirect transfer of wealth to other member states in the Union through the euro.[15] To their outrage, the economic data seemed to portray exactly this scenario. Southern European countries were judged to have used German credibility to borrow excessively at low interest rates. Over the long term they would cause inflation and weaken the euro, which would decrease Southern debt and depreciate Northern assets. This was, whether rational or not, a terrifying perspective for the inflation-weary German public.[16] The public debate intensified to a point where Chancellor Merkel was forced to make clear that she was not willing to consider weakening the ‘no bailout’ clause in the EMU agreements. As a result, interest rate spreads between EMU members reappeared, intensifying the troubles of Southern member states.[17]

The German narrative was popular in many of the Northern European countries. The small, northern Eurozone members, which had already voted against the suspension of the SGP in 2003, pointed to these issues and thought themselves vindicated. The Southern European members on the other hand didn’t defend their deficits, but instead pointed to Germany and France as the original deficit sinners. As examination of the media in 2010 and 2011 shows, this reinforced beliefs that fiscal deficits and the failure of the SGP caused the troubles of the Eurozone.[18]

As Tsoukala noted, two theories developed over the causes of the European crisis, one moral in nature and the other structural.[19] The first theory was that the Northern European states have worked hard, while the Southern Europeans indulged in expansive and inefficient government policies, financing this carelessness with imprudent and unsustainable increases in government debt. The second theory dealt with structural problems of the Eurozone. According to this theory, the countries of the Eurozone were far from forming an optimal currency area at the introduction of the euro. As a result they suffered from institutional burdens that rendered them uncompetitive over time. Instead of reforming, Southern European States chose the easier way of accruing more and more debt. This was made possible by the low interest rates the euro introduced.

Whether either of these theories, the moral one which enjoys popularity among nationalist and populist parties in Northern Europe, or the structural one which is accepted by most part of the political center in Southern European countries, reflects reality is not a question examined here. What is important is that the problems that each of these theories addresses could be solved if governments stopped borrowing unsustainably.  The conclusion is therefore that an imprudent expansion of the government’s balance sheet through persistent fiscal deficits was responsible for the crisis in which Europe found itself. Hence the crisis was identified as a European public debt crisis.

The Idea of Ineffective Fiscal Demand Management, Leading to the Institutionalization of Balanced Budgets

The worldwide embrace of Keynesian demand management through discretionary fiscal policies after the shocks to the financial system in 2008 lasted only briefly in Europe. The reason for this, as Blyth describes, was the victorious rise of a new idea that better fit the existing political consensus in the Eurozone: that fiscal policy has no positive effect on the economy.[20] By mid-2010 this story was echoed by Germany, the European Central Bank and the Commission. These three ideational carriers slowly found acceptance for their interpretation of the crisis -- though it is often difficult to untangle ideas from interests here. Certainly the German right-conservative government was searching for support to reduce the budget deficit after the economy began its recovery.[21] It is unclear, however, why Germany tried to export this idea of austerity to the rest of Europe. The case could be made that increased government spending in other countries would have actually made German austerity easier to bear. It is even more difficult to ascertain what the objective of the European institutions was in their endorsement of austerity. The Commission might have championed the idea in order to increase its control over national budgets, but it could have also argued that more spending was necessary. This would have to have been coordinated at the Union level, but would have been more in accord with popular opinion. As to why the European Central Bank promoted this idea, it most likely saw this strategy as the best way to safeguard its primary concern, the value of the currency.

The publications of the two European institutions argued, based on monetarist economic theory, for cessation of deficits in Europe. As Blyth points out, the European Central Bank published its Monthly Bulletin in June 2010, calling for fiscal consolidation. It emphasized the advantages that consolidation would have by theorizing about reduced effects of fiscal expansions and Ricardian consumers.[22] It predicted that consumers would not consume more if the government would take up debt to offer them a higher income or cheaper prices.[23] The second institution, the European Commission, warned as early as 2009 that fiscal stimulus was, “unlikely to be effective, its multiplier effect being wiped out by 'non-Keynesian' saving responses.”[24]

The story presented by these institutions found traction among policymakers because it explained most of the economic data and fit with the identified cause of the crisis: excessive public deficits. Its predictions are questionable, as ultimately it means that that Eurozone members are always better off when they do not increase their debt burden. It is a prediction that Germany’s Chancellor promoted in 2010, and which she continues to support in 2014.[25] [0]What followed was nested bargaining leading to an agreement among European states that linked financial stability packages to a new procedure that aimed to make sure that budget deficits could never create these problems again.[27] The result was the creation of the MIP as part of the legislative ‘six pack’ in the winter of 2010/2011.

Though there are some ambiguities in the concrete interpretation of the MIP, the overall objective couldn’t be clearer.[28] As article 3(a) of the ‘Treaty on Stability, Coordination and Governance’ of the European fiscal pact states: “The budgetary position of the government of a contracting party shall be balanced or in surplus.” The following paragraphs have provisions watering down this requirement to a 0.5% structural deficit, which can be excused if the economy unexpectedly slumps and therefore fewer taxes are raised and higher social spending is triggered. Nevertheless, it is clear that any grand expenditure program to revive economic activity is a direct violation of the treaty. Additionally, the treaty has a one-sided bias towards a budget surplus.[29] This all shows that the objective of the treaty is not so much to prevent excessive debt or macroeconomic imbalances, but to forbid the creation of any public debt at all.

The effectiveness of the MIP is disputed, and it is too soon to give a long-term evaluation. In the short run, the institution has proven its ability to achieve its objectives and seems to increase in acceptance every year. The MIP was celebrated as a milestone in the monitoring, coordination and enforcement of sustainable fiscal policies in smaller member states like Austria.[30] Moschella judges the new procedure to be likely more effective than IMF economic surveillance due to the threat of sanctions, as well as prescribed closer involvement of the European Commission in the creation of member state budgets.[31] Fabbrini argues that the rules of the fiscal compact are even stricter than the rules that apply to the U.S. federal states.[32]

The evaluation of deficit development and economic forecasts for the Eurozone shows that fiscal austerity is being taken seriously. In 2013 the Eurozone had the lowest deficit of all Western economies (See figure 1). In terms of primary deficit, the difference is even greater. From 2015 onwards the small deficit is even expected to turn into a substantial surplus (See figure 2). While the creation of the MIP might not be the only cause for the steep decrease of the primary deficit, it certainly contributed to it significantly.

Figure 1: IMF World Economic Outlook Database – The Eurozone data includes all current members (Estimates after 2013/14)[33]

Figure 2 [34]

Persisting Depression, the Keynesian Explanations, Institutional Constraints, and the Supranational Way Out

With a growing output gap (see figure 3) and persistent low growth, it soon became clear that simply preventing excessive public deficits was not going to be enough to turn the European economy around. In search of a policy to reignite economic activity in the Eurozone, political leaders have become more open to new ideas. A Keynesian idea of demand management is gaining popularity as its predictions now fit the diagnosed symptoms. Once a Keynesian analysis of the problem is accepted, Keynesian policy prescriptions follow suit. However, these prescriptions have to be fitted into the existing institutional framework.

The ECB under President Mario Draghi was the first European institution to propose both Keynesian explanations and policy prescriptions. In a speech on 22 August 2014, Draghi announced a further easing in monetary policy and called for adopting more growth-friendly fiscal policies. Soon thereafter Draghi asked member states to use their fiscal leeway (if they have any).[35] The reason for all of this is that the Eurozone is feared to be near or in a liquidity trap, where monetary policy no longer has any effect. In such a situation, only expansionary fiscal policy will be able to steer the economy out of crisis and reduce the saving glut that has built up due to the recession.[36]

The political leaders of France and Italy have embraced this ideational shift, and began actively asking in Autumn of 2014 for more fiscal stimulus. The Italian president, Renzi, assumed a direct link between the rise of the populist extreme right parties, low economic growth and fiscal austerity when he announced that he would rather see France’s deficit rise than Marine Le Pen winning the next presidential elections.[37] Only a month later President Hollande asked Germany to do more for aggregate demand and support the economy through fiscal stimulus measures.[38]

However, at the same time, no national leader dares to question the rules of the MIP. Everyone, even the supporters of more active fiscal demand management, has been committed to the objectives of deficit and debt reduction for the foreseeable future. Renzi saw it as necessary to argue with the Laffer curve when he announced that he will reduce taxes in Italy in 2015.[39] At the same time his partner for more public stimulus in the Eurozone, François Hollande, has warned the French electorate of more and deeper budget cuts.[40] This shows that the strict caps on national budgets are now broadly accepted among moderate European leaders.

At the same time, increasing fiscal cooperation and demand management through the European Union, while respecting the limits that were set to national budgets, enjoyed popular support in the Spring 2014 Eurobarometer survey. 89% of Europeans wished for a coordinated response to the crisis. Half of the respondents were content with the European Union approving national budgets in advance, while only a third were against it. Furthermore, 78% of the respondents saw it as a necessity to reduce their home country’s deficit and debt. Only 35% said that measures to reduce the deficit could be delayed.[41]

The newly formed Commission took action against this background in 2014. The program of the main candidates for the European Commission presidency had already supported an increased demand stimulus and better coordination by the European Union to solve the crisis during the European parliament election.[42] Jean-Claude Juncker, who emerged victorious and became the Commission’s new President, started to work on transforming these promises into policies. The Commission also became more active in fiscal coordination. It recently asked Germany to increase investment as France reduces its budget deficit.[43] With his first speech in the European Parliament, Juncker announced a new start for Europe and a spending plan that to increase growth and employment.[44]

The positive public reaction to the 315 billion euro spending plan demonstrated the popular support for new policy direction. The majority of public criticism wasn’t directed against the Commission possibly overstepping its competencies, as would have been expected in the years before the crisis, but against the plan possibly not being large enough.[45] Immediately after the announcement was made, the French president himself called for an even bigger plan.[46]

These developments show that a policy shift occurred in Europe. On the one hand, European policymakers largely accept stringent rules on their budgets and fear sanctions from both the European Commission and financial markets should they not adhere to a course of consolidation. On the other hand, they want to use Keynesian fiscal stimulus to increase aggregate demand and lift the economy out of crisis. Eurozone member states have come to embrace fiscal coordination, deeper fiscal integration, and steps to introduce aggregate demand management on the European level.

Figure 3 [47]

 

Conclusion

In an article in Survival at the beginning of 2014, David Calleo complained about the economic schism of the West.[48] While the United States was engaging in fiscal stimulus during the crisis, Europe was reverting to detrimental and self-destructive austerity. However, there were structural as well as ideational differences between Europe and America, which Europe had to address first before it could respond to the crisis. Now that the structural problems seem to be under control, the trend of recent developments point towards Europe needing to respond with a similar strategy to the United States to counter the crisis. As the new institutions aimed at fixing the structural issues of the European Union require balanced budgets, this path will lead to further integration and new competencies for the European Union. These competencies, while not including a full common fiscal policy, involve the management of the business cycle the responsibility of the European institutions.  Considering these recent developments, in the future the decision whether to launch countercyclical fiscal policy has to be taken by the European institutions and not by the member states.

Andrew Moravscik wrote in a 2010 essay on Europe’s future after the crisis that a convergence of the European economies was necessary to guarantee the future of the euro. While his argument -- that the adjustment costs in the public sector of the deficit countries should be shifted to the private sector of the surplus countries -- doesn’t seem to have found support among European policymakers, he also made another important observation: European budget rules for member states are different from those that apply to federal states in the United States. Moravscik argued that the United States functioned under a single currency, not through full fiscal federalism and orderly bailouts, but through stringent balanced budget rules on the regional level.[49] I argue that in recent years Europe has moved towards balanced budget rules similar to the U.S. From these balanced budget rules the necessity for a supranational competency to manage the business cycle follows automatically.

This paper demonstrates that there is an inherent link between the Macroeconomic Imbalance Procedure, the consequent balanced budget rules, and the new popularity of increased fiscal coordination among European policymakers. The new stringent balanced budget rules might automatically force Europe to solve the problems that Jaques Delors identified as the main deficiencies of the euro. The rules might lead Europe to create a common economic axis with instruments to coordinate and stimulate the economy.[50] The time for this seems right as the interests of member states converge and a new Commission has been taking decisive steps towards this objective. It is too soon to say definitively where the path ends, but it appears to lead to a stronger and more integrated economic and monetary union.

Notes & References

  1. Speech/14/2160, Investing in Europe: speech by President Juncker in the European Parliament plenary session on the € 315 billion Investment Plan, Strasbourg, 26 November 2014.
  2. Communication 903 from the commission to the European Parliament, the Council, the European Central Bank, the European Economic and Social Committee, the Committee of the Regions and the European Investment Bank , An Investment Plan for Europe , 26.11.2014 , "Schäuble Says EU Growth Boost may Require EIB Capital Increase - Bloomberg." http://www.bloomberg.com/news/2014-10-13/schaeuble-says-eu-growth-boost-may-require-eib-capital-increase.html (accessed 12/12/2014, 2014).
  3. Kathleen R. McNamara, The Currency of Ideas : Monetary Politics in the European Union (Ithaca, N.Y.: Cornell University Press, 1998).
  4. For an explanation of why this is necessary:  Paul de Grauwe, Economics of Monetary Union, 8th ed. (Oxford ;New York: Oxford University Press, 2009), p.16.
  5. Blyth in  Mark Irving Lichbach and Alan S. Zuckerman, Comparative Politics : Rationality, Culture, and Structure (Cambridge, U.K. ;New York, NY, USA: Cambridge University Press, 1997), p. 193-219.
  6. McNamara, The Currency of Ideas : Monetary Politics in the European Union (Ithaca, N.Y.: Cornell University Press, 1998), 185.; Kathleen R. McNamara, "Economic Governance, Ideas and EMU: What Currency does Policy Consensus have Today?" Journal of Common Market Studies 44, no. 4 (11/01, 2006), 803.
  7. Craig Parsons, A Certain Idea of Europe (Ithaca: Cornell University Press, 2003), p. 11-15.and p. 231-242
  8. "Responding to the Debt Crisis - European Commission." http://ec.europa.eu/economy_finance/explained/the_financial_and_economic_crisis/responding_to_the_debt_crisis/index_en.htm (accessed 12/11/2014, 2014).
  9. Simon Hix and Bjørn Kåre Høyland, The Political System of the European Union, 3rd ed. (Basingstoke: Palgrave Macmillan, 2011), p. 267.
  10. Leila Simona Talani, European Political Economy : Issues and Theories (Farnham, Surrey: Ashgate, 2014), p. 143.
  11. ibid, p. 153-155
  12. Marco Buti, Sylvester C. W. Eijffinger and Daniele Franco, Revisiting the Stability and Growth Pact: Grand Design Or Internal Adjustment?, 2003).; "Deficits and Defiance | the Economist." http://www.economist.com/node/2031381 (accessed 12/12/2014, 2014).
  13. Barry J. Eichengreen, The European Economy since 1945 : Coordinated Capitalism and Beyond (Princeton: Princeton University Press, 2007), p. 372.
  14. Otmar Issing, The Birth of the Euro [Euro. English] (Cambridge, UK ;New York: Cambridge University Press, 2008), p. 193.
  15. "Germany and the Euro: We Don'T Want no Transfer Union | the Economist." http://www.economist.com/node/17632957 (accessed 12/12/2014, 2014).
  16. Mark Blyth, Austerity : The History of a Dangerous Idea (Oxford: Oxford University Press, 2013), p. 56.
  17. Erik Jones, "Merkel's Folly," Survival (00396338) 52, no. 3 (06/01, 2010), 21.
  18. Newspaper articles telling this narrative:  "BBC News - did Germany Sow the Seeds of the Eurozone Debt Crisis?"http://www.bbc.com/news/world-europe-16761087 (accessed 12/12/2014, 2014).; "The Ticking Euro Bomb: How the Euro Zone Ignored its Own Rules - SPIEGEL ONLINE." http://www.spiegel.de/international/europe/the-ticking-euro-bomb-how-the-euro-zone-ignored-its-own-rules-a-790333.html (accessed 12/12/2014, 2014).
  19. Philomila Tsoukala, "Narratives of the European Crisis and the Future of (Social) Europe," Texas International Law Journal 48, no. 2 (03/01, 2013), 241.
  20. Blyth, Austerity: The History of a Dangerous Idea (Oxford: Oxford University Press, 2013), p. 61.
  21. "Germany's Budget Deficit: Slash and Bounce | the Economist." http://www.economist.com/node/16333407 (accessed 12/13/2014, 2014).
  22. European Central Bank, "Monthly Bulletin June," Monthly Bulletin, 2010, .
  23. Blyth, Austerity : The History of a Dangerous Idea (Oxford: Oxford University Press, 2013), p.61.
  24. European Commission (2009), “Economic Crisis in Europe. Causes, Consequences and Responses”, p. 83. 

  25. Peter Spiegel, "EU Leaders Back New Bail-Out System - FT.Com," http://www.ft.com/cms/s/14b22126-0948-11e0-ada6-00144feabdc0,Authorised=false.html?_i_location=http://www.ft.com/cms/s/0/14b22126-0948-11e0-ada6-00144feabdc0.html?siteedition=uk&siteedition=uk&_i_referer=#axzz3LoUxVqGB (accessed 12/13/2014, 2014).
  26. Stefan Wagstyl and James Politi, "Merkel Defends Fiscal Rules as Paris and Rome Put Growth First - FT.Com," http://www.ft.com/intl/cms/s/fedbfcfc-5518-11e4-b616-00144feab7de,Authorised=false.html?_i_location=http://www.ft.com/cms/s/0/fedbfcfc-5518-11e4-b616-00144feab7de.html?siteedition=intl&siteedition=intl&_i_referer=#axzz3LoUxVqGB (accessed 12/13/2014, 2014).
  27. "BBC News - EU Leaders Frame Eurozone Crisis Rules." http://www.bbc.co.uk/news/world-europe-11649448 (accessed 12/13/2014, 2014).
  28. Mark Hallerberg, Benedicta Marzinotto and Guntram B. Wolff, How Effective and Legitimate is the European Semester? Increasing the Role of the European Parliament (Brussels: Bruegel,[2011]).
  29. Zsolt Darvas and Erkki Vihriälä, Does the European Semester Deliver the Right Policy Advice?Bruegel, [2013]).
  30. See for instance  Walpurga Kohler-Toglhofer and Peter Part, "Macro Coordination Under the European Semester," Monetary Policy and the Economy (4th, 2011), 59-73. as well as  Sebastian Essl and Alfred Stiglbauer, "Prevention and Correction of Macroeconomic Imbalances: The Excessive Imbalances Procedure," Monetary Policy & the Economy: Quarterly Review of Economic Policy (10/01, 2011), 99.
  31. Manuela Moschella, "Monitoring Macroeconomic Imbalances: Is EU Surveillance More Effective than IMF Surveillance?" Journal of Common Market Studies 52, no. 6 (11/01, 2014), p. 1280.
  32. Federico Fabbrini, "The Fiscal Compact, The "Golden Rule," And The Paradox Of European Federalism," Boston College International & Comparative Law Review 36, no. 1 (01/01, 2013).
  33. IMF Worlde Economic Outlook Datatbase – The Eurozone data includes all current members (Estimates after 2013/14)
  34. ibid.
  35. "Draghi Says ECB Measures could Include Buying Government Bonds - Bloomberg." http://www.bloomberg.com/news/2014-11-17/draghi-lists-new-year-resolutions-to-aid-ecb-monetary-stimulus.html (accessed 12/17/2014, 2014).
  36. Paul Krugman, "Mr Keynes and the Moderns," Vox (21 June, 2011).
  37. James Politi, "Matteo Renzi Says Berlin has no Right to Lecture its Partners - FT.Com," http://www.ft.com/intl/cms/s/0/910e5dc8-4ad7-11e4-b1be-00144feab7de.html#axzz3MDh637wH (accessed 12/17/2014, 2014).
  38. "Hollande Falls into Line as Merkel Fends Off EU Spending - Bloomberg." http://www.bloomberg.com/news/2014-10-08/merkel-sidesteps-hollande-s-call-to-stimulate-eu-economy.html (accessed 12/17/2014, 2014).
  39. "Italy’s Budget: Mamma’s Boy | the Economist." http://www.economist.com/news/europe/21627713-matteo-renzi-gives-mothers-tax-break-mammas-boy (accessed 12/18/2014, 2014).
  40. Hugh Carnegy and Stefan Wagsty, "Hollande Warns France of Tough Spending Cuts - FT.Com," http://www.ft.com/intl/cms/s/0/8a62cff0-4897-11e4-9d04-00144feab7de.html#axzz3MDh637wH (accessed 12/18/2014, 2014).
  41. Standard Eurobarometer 81(June 2014), , Europeans, The European Union and the Crisis, Spring 2014
  42. "Leading Candidates Square Off: 'The Inequity is Enormous' - Spiegel Online." http://www.spiegel.de/international/europe/european-commission-candidates-square-off-in-spiegel-debate-a-959565-2.html (accessed 12/18/2014, 2014).
  43. "European Commission: Germany must Invest More, France Spend Less | EurActiv." http://www.euractiv.com/sections/euro-finance/european-commission-germany-must-invest-more-france-spend-less-309470 (accessed 12/18/2014, 2014).
  44. Speech of Jean Claude Juncker in the European Parliament (15 July 2014), A New Start for Europe: My Agenda for Jobs, Growth, Fairness and Democratic Change.
  45. "The European Commission’s Investment Plan: Fiddling while Europe Burns | the Economist." http://www.economist.com/news/leaders/21635017-jean-claude-junckers-investment-package-laughably-inadequate-fiddling-while-europe-burns (accessed 12/18/2014, 2014).
  46. "France's Hollande Says Juncker Investment Plan Needs More Money | Reuters." http://uk.reuters.com/article/2014/11/27/us-france-economy-juncker-idUKKCN0JB17920141127 (accessed 12/18/2014, 2014).
  47. World Economic Outlook Datatbase – The Eurozone data includes all current members (Estimates after 2013).
  48. David P. Calleo, "The Economic Schism of the West," Survival (00396338) 55, no. 6 (12/01, 2013), 211.
  49. Andrew Moravcsik, "Europe After the Crisis," Foreign Affairs 91, no. 3 (05/01, 2012), p. 64-65.
  50. Jacques Delors, "Economic Governance in the European Union: Past, Present and Future: JCMS 50th Anniversary Lecture," Journal of Common Market Studies 51, no. 2 (03/01, 2013), p. 175.
Philip Schnattinger is a second year student at SAIS. He specializes in Global Theory’s Political Economy concentration and in Quantitative Methods and Economic Theory. Before pursuing graduate studies he obtained two undergraduate degrees in in law, and in business, economic, and social sciences in Vienna.