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On March 10, Bocconi University in partnership with the BLEST Lab and the Institute for European PolicyMaking hosted The Future of Europe Conference. This very special event brought together high-level representatives of European institutions, member states, and think tanks for a discussion of what Europe’s governance, macroeconomic, and sustainable future looked like. Since each of the panels involved lengthy speeches, debates, and (at times) combative Q&A’s with the audience, I decided to devote separate blog posts to the Governance and Macroeconomics panels. This one focuses on the proceedings from the Macroeconomics panel, which was chaired by Prof. Elena Carletti of Università Bocconi and involved Michala Marcussen (Chief Economist of the Société Générale Group), Kalin Anev Janse (CFO of the European Stability Mechanism and European Financial Stability Facility), and Ugo Panizza (a professor at the Geneva Graduate Institute). These reflections do not represent my own opinions, but those of the panelists I quote, and is an effort to share and communicate the current mood and thinking of expert European economists on the health and future of the economy and financial system in the present moment. If you read Part I of this blog, then you will notice that the headings of these reflections are the same, although the Macroeconomics panel took their thoughts and recommendations in a very different direction than the Governance one. In my view, they are equally insightful and revealing!
Reflection #1: Treaty reforms inspired the most enthusiasm, and the biggest ideas. While none of the panelists were supporting or detracting from calls for fiscal union in the EU, Panizza did suggest that, if such a step were to occur, it was the massive capitalization of the NextGenEU funds (referred to as PNRR in Italy) that broke the taboo in EU institutions influencing and injecting money into member states’ fiscal policy. However, with the ECB taking on a more and more discretionary role in member state financing through policies of quantitative easing (QE) and outright monetary transactions (OMT), Panizza worries the ECB is becoming the “fiscal watchdog of Europe.” Marcussen added later on that all the current proposals for common EU debt suggest dividing the fiscal union into ‘normal’ and ‘excess’ levels of debt such that in times of fiscal downturn or crisis, states are still responsible for solely their own ‘excess’ levels. Such measures are supposed to calm fears of the 'Frugal Four' (Austria, Denmark, the Netherlands, and Sweden) that fiscal union would lead to precarious spending across the bloc and tie their sovereign wealth to fiscal impropriety by other member states. Marcussen also brought up how it may be wise to create mechanisms of some kind for governments to have access to safe funding at all times, instead of only having access to the ESM in times of crisis. Concerns over the fiscal health of member states and the EU more broadly also remain from the Covid-19 shocks, and those from the war in Ukraine and resulting energy crisis. Prof. Panizza was very frank in describing how debt-to-GDP ratios are at more elevated levels than they were before the Great Recession, and accelerations in GDP which bring this number down may be due to inflation, not real growth. While the spreads between bond yields in Eurozone countries remain relatively low, the markets can judge the economic health of the entire system incorrectly. The largest and most explicit calls for reforms came from Janse. Janse argued that the treaties should be reformed such that the ESM is accountable to the European Parliament, instead of the individual member states, as it is currently. However, it should be noted that the ESM, in its current design, is highly accountable to the national parliaments, and as such is an intergovernmental institution. Reflection #2: More Europe, but also smarter/“strategic” Europe. For Marcussen, the economic risks from de-linked fiscal and monetary policy strategies are only part of the need for more Europe in macroeconomics. The other reason is that challenging geopolitics along with high inflation and shorter economic cycles will make economic transitions more volatile and unpredictable for economists and experts to manage. Janse made the position that European institutions like the ESM are better positioned from US-centered or even global institutions like the IMF. (To my own surprise, the ESM is apparently better capitalized than the IMF.) The ESM also works similarly to the IMF, with countries in fiscal distress and undergoing market exclusion able to access precautionary lines but under conditionality measures of structural reforms. The ESM has a hugely positive brand with private lenders, which has led to low “market stigma” and helped to create the view that ESM lending is critical to investors trusting new and re-investments in states that go to the ESM for help. It was raised by Goulard in the audience, however, that part of why ESM reforms (like being brought directly into the Treaty on the Functioning of the EU) might not be implemented is because more mechanisms, like the ESM itself and open monetary transactions (OMT), are created and work. From this perspective, creating more institutional European mechanisms to respond to crises has instituted much-needed emergency instruments, but prevented having more difficult conversations about long-term institutional reforms that are necessary. Goulard referenced at this point fervent debate in France over Macron’s plans to raise the retirement age; a policy change and reform we now know quite literally burst to the surface of French politics after Macron invoked article 49.3 of the French constitution to ram through the raised pension age. Her main point was that macroeconomic funding needs to not only be dedicated to creating new instruments, but most importantly to investing in the future (such as in education). Reflection #3: America was front and center, in good and bad ways. In Marcussen’s opinion, the US overstimulated household income with its Covid-19 relief policies, whereas the EU provided the right amount of economic stimulation while also protecting household incomes. The US and Europe are not conceived of as rivals in Covid-19 recovery and anti-inflation plans, although the fiscal and monetary decisions made on both sides of the Atlantic can and will influence one another (particularly due to the linkage of reserve currencies). Each should therefore pay attention to the actions and macroeconomic forecasts of the other. The US also came up in history lessons from Janse – he explained how the Dutch Guilder was the global reserve currency before it was the British Pound, and is now the US Dollar; but, the euro’s creation has given the Eurozone a way to compete for control in the global financial and monetary markets as the world’s second reserve currency. As the current bout of inflation and recent collapse of some regional banks brings monetary and macro-prudential policy front and center once more amidst claims that the US dollar is slowly declining in its role as the global reserve currency, we might all benefit from taking some meaningful glances at monetary history in its longer perspective. Writing these two blog posts has made me think about what types of issues would garner the most focus if US states were to host a conference amongst various policy experts. Obviously the US is not in need of anything like “treaty” reforms between the states since the US is a complete political, fiscal, monetary, and prudential union. But it is still an interesting intellectual exercise to think about what issues might predominate the discussions, and if/how state and federal action could work in tandem to reduce polarization on some issues in favor of tangible, implementable solutions. Gun control reform, the opioid epidemic, and healthcare costs/equity come top of mind to me as potential areas that might benefit from tempering down the “national” heat and anger that comes from different ideological sides and may benefit from state-level cooperation and task forces to create actionable and politically feasible steps to make real progress. Acknowledgements Thanks Università Bocconi and BLEST for hosting events like this and allowing students to attend!
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On March 10, Bocconi University in partnership with the BLEST Lab and the Institute for European PolicyMaking hosted The Future of Europe Conference. This very special event brought together high-level representatives of European institutions, member states, and think tanks for a discussion of what Europe’s governance, macroeconomic, and sustainable future looked like. As a student of European politics and institutions, and an American, I wanted to reflect on some of the biggest takeaways and areas of agreement (which were fewer in number than the disagreements :) ) from the panels. Since each of the panels involved lengthy speeches, debates, and (at times) combative Q&A’s with the audience, I have decided to devote separate blog posts to the Governance and Macroeconomics panels. This one focuses on the outcomes from the Governance panel, which was presented by Jean Pierre Vidal (Chief Economic Advisor to European Council Pres. Michel), Brigid Laffan (Emeritus Professor of the European University Institute in Florence), and Sylvie Goulard (Member of France’s Ministry of Foreign Affairs) and moderated by Prof. Catherine DeVries of Bocconi. These reflections do not represent my own opinions, but those of the speakers and panelists I quote, and is an effort to share and communicate the current mood and thinking of expert Europeans in the present moment.
Reflection #1: Treaty reforms inspired the most enthusiasm, and the biggest ideas. In many ways, the EU’s collective response to Brexit and to the Covid-19 pandemic was seen by the panel as paving the way for serious discussions about treaty reforms to the EU’s institutions. Central to this discussion was how and whether treaty reforms would secure popular support across the EU, how the EU could be made more accountable to European citizens, and the usual ‘unanimity’ versus ‘intergovernmentalism’ debate about EU decision-making. Goulard felt very strongly that the EU would need to end decision-making by unanimity if the EU were to take the hard decisions necessary to avert the climate crisis and stand up to dangerous external threats. She used examples like the hamstringing of the UN Security Council by unanimity rules, and the fact that even university boards are not run by unanimity. Vidal was much more diplomatic, defending how unanimity allows for a representation of all member state interests and states are unlikely to give up their veto power. But questions about how treaty reforms could improve EU accountability were at the heart of these talks. Laffan also turned this topic on its head in some ways, as she brought up how member state governments need to take responsibility for “bringing Europe home” to their citizens and explaining the necessity for reforms to them. As someone experienced in consulting on campaigns for passing EU treaties (in Ireland), she stressed that it becomes the role of national MPs to explain to their constituents what the changes to Europe will offer them. The biggest obstacle, in her view, to MPs' ability to do this was that they often do not understand themselves what the treaties are or mean. These national-level actors therefore need to be trained in the treaties and reforms so that they can “sell” it in their respective member states and communities. Mario Monti, Italy’s Prime Minister (Pres. of the Chamber of Deputies) from 2011-2013, attended the event as a former head of government and former President of Bocconi, and threw in his own ideas for reform of the European Council. PM Monti suggested the European Council adopt a code of conduct to combat the “reprehensive” behavior the member state leaders have towards each other at the table, and even worse behavior in their national press conferences. Interestingly, he also suggested the European Council is the EU institution in most need of urgent reforms. Prof. Laffan suggested in her reply that this might be a good idea. She reasoned that, as a soft instrument, a code of conduct would be a small change that could maybe be snuck in without an outcry from many members of the European Council, but it “becomes a benchmark to at least call out bad behavior.” Monti and Laffan both stressed that the Council should not be “beyond accountability,” and that the appointment of a permanent president has been a good thing for the institution. Vidal thanked both Goulard and Laffan for answering Monti’s suggestion at length so that he could dodge it as current advisor to Pres. Michel! On the topic of EU budgets, strategic action was front-and-center, but not some of the more extreme reforms like the full creation of a federal EU budget. Prof. Laffan thought a larger EU budget will be required to address present risks to the single market. But again, this conversation was quickly brought back to how to make a “European Union of citizens” who must feel fully represented in the decision-making of EU bodies, particularly if they are to take on more power and responsibility, potentially through treaty reforms. Reflection #2: More Europe, but also smarter/“strategic” Europe. This idea of “more Europe,” or even more investments of power and resources in EU institutions, is a serious policy idea, but one that is often discussed with a bit of humor these days because of how often it is brought up. While I would assume all the panelists favor “more Europe,” what was interesting was how there was an even greater focus and commonality in their responses that suggested Europe should hone in on smart and strategic decisions. Prof. Laffan decried how the word “strategic” is increasingly being used in tandem with “Europe,” but without clarity about what exactly this means in mind. In her view, strategic means having EU policy that works, has the capacity to respond to challenges, and some agility since governments are operating in a time of high risk and complexity. From Goulard’s perspective, a smart Europe would have to address the climate change and biodiversity crises first and foremost, as these are the most pressing issues. And while there are serious clashes of preferences between the member states over energy policy and the way forward in the green transition, Goulard emphasized that the EU should not become complacent on national interests. Reflection #3: America was front and center, in good and bad ways. Since geopolitical and security threats were front and center in many of this panel’s talking points, I was surprised that the US was brought up more than Russia or China (although of course both were talked about at length, and the US was framed as a perplexing ally while China and Russia were framed as rising or imminent threats). The chief negative complaint from this panel and the others about the US involved Pres. Biden’s Inflation Reduction Act (IRA) which, in heavily subsidizing green investments in the US, has weakened Europe’s competitive position in the green transition. The IRA was described by Prof. Laffan as a policy “lobbed onto the European table” and risks subsidy competition between the US and EU, which she warned against. In a good way for the EU (but not as great for the US), Vidal also reminded attendees that prices are lower in the EU than the US because of the European single market and competition policy. On the technology side, the US came out as a “winner” from the panel’s discussion. Goulard emphasized how twenty years ago, Europe was ahead of the US on technology, but since then the US made much more investments in tech, and now the EU lags behind the US in technology competition. Vidal went further than Goulard, stating that the EU needed to invest in tech as much as the US and China to remain competitive and maintain innovation. However, this panel happened before the SVB collapse, and I wonder if some of these positions would be more nuanced and also focus on prudential policy health if the discussions were instead held today. In any case, Prof. Laffan felt the EU-US Trade and Technology Council is a dynamic entity that allows for dialogue on technology and other investment decisions and disputes between the two unions, which is important while the European Council tries to address the future of technology in the EU. These are just some of the many highlights of the masterful panel that was chaired by Prof. DeVries. Other topics included the COVID-19 response and health policy, defense policy, “strategic autonomy”, and NATO; and the energy transition, to name a few. Acknowledgements Thanks Bocconi and BLEST for hosting events like this and allowing students of all backgrounds to attend!  I was very honored to have the chance to speak on a panel at the Ukrainian Global University’s (UGU) first annual conference as a UGU volunteer. The theme of the conference was “A straight talk about human capital development among students, co-founders, and partners” and the discussion was inspiring and uplifting, even against the sadness and heartbreak of recent strikes on Ukraine that have killed and injured civilians.
The UGU organizers talked about the success of the program, even in its early and initial phase last year, which saw the placement of fifty-two highly talented and advanced Ukrainian students in Western universities. A few UGU students from this first cohort talked honestly about their experiences – from making new friends and meeting new people, to being surprised how many Ukrainian societies/student organizations there are in foreign universities and cities, and some challenges that came with adapting to a new place and a new education system. Undeterred and perseverant, the students were enthusiastic about wanting to return to Ukraine and contribute to its growth and development after the war. Several expressed an interest in joining the civil service and contributing to the ministries of finance and economics. All were steadfast in wanting to learn as much as they can while abroad and teach their peers about Ukrainian culture and history, and then to come home to Ukraine and build a better future for their country. It was also heartwarming to hear from academics and university administration officials that working with UGU had been a highlight of their professional careers, and that their universities were working to ensure they can take more Ukrainian students in the next year, although it is unfortunate that the program needs to continue for yet another academic cycle. A few Deputy Ministers of the Ministry of the Economy and Ministry of Social Policy also spoke at the conference, and it was enlightening and interesting to hear the perspectives of those within the government. The Deputy Minister from the Ministry of the Economy spoke at length about how improving human capital during the war was vital to Ukraine being able to rebuild after the war and the economy’s ability to attract foreign capital and investment. And the representatives from the Ministry of Social Policy echoed the thoughts of the Ministry of the Economy that educational investments for today and tomorrow’s young generations are necessary to protect and strengthen Ukrainian society during and after the war. There were then some claims by the civil society representatives that the government should focus on enacting reforms now, even with the war going on, as opposed to waiting for the reconstruction efforts. Those in the government, however, pushed back and elaborated upon some reform efforts already taking place. In short, there were key points that came out of the discussions and which provide reflections and recommendations for how government and university partners can approach reconstruction, rebuilding, and investments in human capital in Ukraine. The key points:
If anyone reading this is interested in volunteering with UGU in the future, please reach out to Dr. Dmytro Iarovyi, other UGU organizers, or myself. Acknowledgements Thank you to the Kyiv School of Economics for the kind and gracious invitation to participate in the UGU conference. I am grateful that I was entrusted to speak on behalf of other incredible volunteers who helped with last summer’s intake of the UGU cohort. |
AuthorSienna Nordquist is a PhD Candidate in Social and Political Science at Bocconi University. She is an alumna of LSE's MSc in European and International Public Policy and was a Robert W. Woodruff Scholar at Emory University. 
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