Brexit, banking and the euro: how will the events of 2016 affect the EU? ADEMU’s scientific coordinator Ramon Mariman looks back at a turbulent year and examines the effect the year’s events will have on the European monetary framework.

2016, coming to an end, has certainly gained its place in the history books, with their love of critical, unforeseen events.  In such years, plans made just a year ago may need to be revised.

The end of 2016 also marks the mid-term of the Horizon2020 ADEMU project. Fortunately, none of the unforeseen events has directly affected the project, but may do so indirectly, for two reasons. One has to do with research funding, the other with the object of our research.

Two of our eight partners are UK universities: Cambridge and UCL. Whatever form Brexit takes, it will be after the ADEMU project ends. In this sense, it doesn’t in theory affect us at all, but yet it may, since a disruption to European Research collaborative funding may make it more difficult, if not impossible, to organize research consortia such as ADEMU. Let us just hope that Brexit will not fracture the European Research Area, and that research funding will not be damaged by it, the results of the US elections, or the rise of populism.

The object of our research is the reassessment of the fiscal and monetary framework of the EU and, in particular, the euro area. The EU will certainly change with Brexit, but so too will the euro area, which becomes more important within the EU; in particular, the fiscal side of both can be reassessed with a new perspective, and not only due to Brexit.

2016 has turned European migration, defence and security policies into EU public goods, and joint provision will be more efficient than just collaboration. An EU defence or migration policy does not necessarily mean an EU army or an EU frontier police, but it certainly does mean more reliable financial resources: even if they are part of the national budgets, they should not be subject to unilateral disruptions.

In the aftermath of the euro crisis, 2016 has not been exempt from banking problems, testing the incipient European Banking Union structure and policies. Neither has it seen the end of the ECB stimulus policies, such as the asset purchase programme, which has recently been extended, while the ESM is issuing its longest bond maturity programme (40 years) this month. The question whether and how a euro area Treasury and/or a proper risk-sharing facility are needed to complete and back up this financial framework, becomes even more pertinent when the EMU takes on a more important role in a post-Brexit EU. These are questions that research – in particular, ADEMU research – can help to elucidate but, in the end, policy will decide whether the 2015 plan of the Five Presidents’ Report needs to be revised or implemented, after this historical 2016.