Our two-day conference, organized with the European Stability Mechanism, the International Monetary Fund and the Bank of Spain, saw participants representing the European Commission, central and private banking groups and economic research groups discuss the need for – and the scope of – a fiscal union within the European Monetary Union (EMU).
During the conference, held at the Bank of Spain’s Madrid headquarters, 57 international economists, lawyers, social scientists and researchers presented research and findings into the need for a fiscal union and discussed the future of the euro area.
Participants discussed their own research alongside the EC’s current proposals for the EMU, detailed in its White Paper on the Future of Europe. In the paper, the EC suggests five suggested outcomes: 1) carrying on; 2) nothing but the single market; 3) those who want more do more; 4) doing less more efficiently, and 5) doing much more together.
Introducing the conference, ADEMU’s scientific co-ordinator Ramon Marimon referred to the white paper. Rather than the five scenarios suggested in the paper, he said, there was one over-riding principle: the ‘3½ solution’, in which those who want to, do more, but only what can be done efficiently is done.
He added: “As social scientists, we can use the 3½ principle to reassess the fiscal and monetary framework of the EU and, in particular, of the EA, which is the objective of ADEMU.”
Speaking after the conference, he said: “It was very interesting to note that there was a firm consensus among such a wide range of experts in many areas, particularly the need for a minimal form of fiscal union for the EMU.”
Other proposals discussed included:
- The need to complete the European Banking Union, with an effective resolution mechanism, the capacity to confront difficult resolution processes (debtor-in-possession financing) and common deposit insurance;
- The implementation of fiscal transparency and independent fiscal institutions alongside existing procedures to penalise false reporting;
- Risk-sharing and unemployment insurance to improve existing schemes of debt financing and national unemployment insurance.
The full conference ran as follows (participants in bold; all available slides and papers linked within the text):
Day 1
Welcome to the Bank of Spain, Juan Francisco Jimeno, Banco de España
The aim of this ADEMU conference, Ramon Marimon, European University Institute
ON MONETARY POLICY, FISCAL POLICY, AND PRIVATE FINANCE INTERACTION
Chair: Rodolphe Blavy, International Monetary Fund
Monetary-Fiscal Interactions and the Euro Area’s Malaise
Marek Jarociński, European Central Bank; Bartosz Mackowiak, European Central Bank
Discussant: Jean-Pierre Danthine, Paris School of Economics
Aggregate Demand Externalities in a Global Liquidity Trap
Luca Fornaro, CREI & Universitat Pompeu Fabra; Federica Romei, Stockholm School of Economics
Discussant: Alessandro Barattieri | Collegio Carlo Alberto and ESG UQAM
ON EMU FISCAL RULES
Chair: Árpád Ábrahám, European University Institute
Fiscal rules, bailouts, and reputation in Federal governments,
Alessandro Dovis, University of Pennsylvania; Rishab Kirpalani, New York University
Discussant: Charles Brendon | University of Cambridge
The political economy of fiscal transparency and independent fiscal councils
Roel Beetsma, Universiteit van Amsterdam; Xavier Debrun, International Monetary Fund; Randolph Sloof, Universiteit van Amsterdam
Discussant: Carlos Mulas Granados | International Monetary Fund
POLICY PANEL: Are current fiscal rules credible? What is the role of fiscal rules and of independent fiscal councils?
Chair: Päivi Leino-Sandberg, UEF Law school and European University Institute
Introduction: Are Fiscal Policy Rules Part of the Solution or the Problem?
Matthias Goldmann, Goethe University Frankfurt
Panel participants: José Luis Escrivá, AIReF, Frans van Nispen, Erasmus University Rotterdam, René Smits, University of Amsterdam
ON RISK SHARING (new ADEMU results) & POLICY REFORMS
Chair: Pedro Teles, Universidade Católica Portuguesa
On the Design of a European Unemployment Insurance Mechanism
Árpád Ábrahám, European University Institute; João Brogueira de Sousa, European University Institute; Ramon Marimon, European University Institute; Lukas Mayr, European University Institute
On the optimal design of a Financial Stability Fund
Árpád Ábrahám, European University Institute; Eva Cárceles-Poveda, SUNY at Stony Brook; Yan Liu, Wuhan University; Ramon Marimon, European University Institute
Attitudes Towards Institutional Reforms For The Euro Area
Matthias Dolls, ZEW Mannheim and IZA; Nils Wehrhöfer, ZEW Mannheim and University of Mannheim
Discussants: Paolo Pasimeni, European Commission; Tuomas Saarenheimo, Finnish Ministry of Finance
POLICY PANEL: A Treasury for the Banking Union?
Chair: Xavier Vidal-Folch, EL PAIS
Introduction: Martin Hellwig, Max Planck Institute
Panel participants: Thomas Cooley, New York University, Stern Business School; Isabel Correia, Bank of Portugal; Federico Fabbrini, Dublin City University; Thomas Wieser, Euro Group Working Group
Day 2
ON THE EMU AND FISCAL FEDERALISM
Chair: Tomasz P. Wozniakowski, LMU Munich
Hamilton’s Paradox revisited: lessons from the euro area crisis for US history
Waltraud Schelkle, London School of Economics
Discussant: Johannes Fleck, European University Institute
Fiscal delegation in a monetary union: Instrument assignment and stabilization properties
Henrique Basso, Bank of Spain; James Costain, Bank of Spain
Discussant: Andreja Lenarčič, European Stability Mechanism
ON SOVEREIGN DEBT AND STABILIZATION POLICIES
Chair: Aitor Erce, European Stability Mechanism
Sovereign Default Risk and Firm Heterogeneity
Cristina Arellano, Federal Reserve Bank of Minneapolis; Yan Bai, University of Rochester; Luigi Bocola, Northwestern University
Discussant: Christian Hellwig, Toulouse School of Economics
When Ramsey Searches for Liquidity
Wei Cui, University College London
Discussant: Chima Simpson-Bell, European University Institute
POLICY PANEL: Debt overhang and stabilization policies
Chair: Thomas Cooley, New York University, Stern Business School
Introduction: A safe sovereign asset for the Eurozone?”
Ad van Riet, European Central Bank Panel
Panel participants: Jeffrey R. Franks, International Monetary Fund, European Division; Svend E. Hougaard Jensen, Copenhagen Business School; Jean-Marc Fournier, OECD; Rolf Strauch, European Stability Mechanism
ON A FISCAL UNION FOR THE EMU
Chair: Juan Francisco Jimeno, Banco de España
Fiscal Unions
Emmanuel Farhi, Harvard University
Discussant: Rody Manuelli, Washington University in St. Louis
Beyond the Five Presidents’ Report
Marco Buti, European Commission
POLICY PANEL: How much of a fiscal union for the EMU?
Chair: Martin Sandbu, Financial Times
Panel participants: Joaquín Almunia, Former Vice President of the European Commission; José Manuel Campa, Banco Santander; Ana Gouveia, Portuguese Ministry of Finance; Javier Pérez, Bank of Spain; Guido Tabellini, Bocconi University
CONCLUDING REMARKS
Chair Pedro Teles, Universidade Católica Portuguesa
Organizing Committee: Aitor Erce, European Stability Mechanism; Jeffrey R. Franks, European Division, International Monetary Fund; Juan Francisco Jimeno, Banco de España; Ramon Marimon, European University Institute, UPF, Barcelona GSE.
The presentations or conclusions of the conference do not necessarily reflect the views of the organising partners, and should not be reported as such.
DAY ONE
DAY TWO
