On Wednesday, February 14, 2018, the Atlantic Council’s EuroGrowth Initiative hosted a breakfast discussion on the changing Franco-German attitudes towards European Union (EU) economic governance.
The discussion was led by Valerie Rouxel-Laxton, most recently Head of Economic and Financial Affairs at the Delegation of the European Union to the U.S. Featured speakers were economists Jeromin Zettelmeyer and Nicolas Véron, who briefly introduced their recent paper “Reconciling risk sharing with market discipline: A constructive approach to euro area reform”. The report is co-authored by a team of 14 French and German economists, examining into potential reforms to financial regulation and economic governance institutions within the EU. The paper represents an effort to bridge traditional diverging stances of French and German schools of thought, particularly regarding risk sharing and fiscal discipline.
The discussion focused on ways to minimize the dilemma between crisis prevention and mitigation, creating risk-sharing policies that depend on a countries’ implementation of good policies ex ante and not just ex post. All this while recognizing that even a strong “no bailout clause” that offers extra support in return for debt restructuring can backfire. The discussion also touched upon fiscal policy, with the acknowledgement that sanctioning member states needs fine-tuning and is not always an optimal solution.