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www.streitcouncil.orgState of the European Economic Union

School of International Service

November 5th, 2010

Griffin W. Huschke

The School of International Service hosted an even discussing the European economic climate. Thetwo-day conference reviewed recent developments in labor migration policy, services, goods,

monetary and financial regulations and assessed how the single market has evolved in a period of

financial turbulence and increased protectionism.

The introductory panel surveyed the single market, and welcomed Dr. Shawn Donnelly to provide

opening remarks. Dr. Donnelley sought to elucidate the regimes of European integration, and

described how the EUs powers were limited by normative factors, in that banking regulation was weak

and capital reserves were untouched.

The second panel discussed monetary and fiscal issues, and was opened by Dr. Matthias Matthijs, who

described the five competing narratives of the financial crisis, as put forth by governments and the

media. Dr. Matthijs concluded that three narratives were correct, and that the lack of efficient

financial markets, a crisis of competitiveness, and fiscal irresponsibility were all factors in the currentEuropean economic downturn. Moving forward, Dr. Matthijs cautioned against a single market that

was dependent solely on German exports for economic growth.

Dr. Matthijs was followed by Dr. Jacob Kirkegaard, who explored the effects of the current financial

crisis on Europes long term structural reform agenda. Dr. Kirkegaard pointed to EU bond market

convergences as a failure of the markets, but noted that the current markets were influencing EU

government reform and member budgets. Overall, Dr. Kirkegaard explained the cyclically adjusted

rigidities in Europe were much smaller than feared before the crisis, but that France and Germany

were being introduced to moral hazard by bailing out EU member states. According to Doctor

Kirkegaard, this moral hazard could be reduced by post facto conditionalities, political sanctions, and

haircuts for bond holders, and that the EU had no choice but to introduce the worlds first

operational sovereign debt restricting mechanisms in the coming months.

When asked to discuss a country potentially leaving the Eurozone, both Dr. Matthijs and Dr.

Kirkegaard dismissed the possibility, claiming that the costs would be far too great for any

democratically elected European government.

Angelos Pangratis, the Deputy Head of Delegation from the Delegation of the European Union to the

United States and keynote speaker ordered his presentation around the public policy reactions to the

financial crisis, which he claimed were threefold. First, global solutions have become more pertinent,

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as they address all aspects of an increasingly globalized economy. Second, public policy cannot keep

up with globalization, and, finally, that fiscal sustainability and public debt would prove to be a major

challenge for the developed world. Mr. Pengratis reiterated that coordination among EU member

states were done in solidarity, and that the monetary union allowed Europe to react much quicker

than with individual monetary policies.

When asked to address the idea of a US-EU free trade agreement, Mr. Pengratis demurred, sayingthat such an agreement would disallow a multilateral approach. Such an agreement would be like

two giants squeezing each other out, but that work should progress on harmonizing rules and

regulations in the US and EU, and increasing the free movement of capital and people.

The final session of the seminar addressed economic governance in the EU in terms of services goods

and competition. Dr. Adrian Lejour discussed the necessary structural reforms to increase efficiency in

the internal market for services. Dr. Lejour noted that halving barriers to trade in services could

increase service trade flows by 50 to 100 percent and that simple measures, like eliminating

redundant regulations and cutting investment barriers, could greatly increase trade flows. Dr. Helena

Guimares addressed the recent EU Monti Report, and refuted the claim that market maintenance

was enough to facilitate economic growth in the European Union. She claimed that the single market

is not yet mature, and that there are significant barriers to trade in food, automobiles and the health

sector. Finally, Dr. Kenneth Thomas, explained his thesis on how capital mobility makes governments

on both sides of the Atlantic compete for capital by providing economic incentives for business.