Europe tomorrow: TIE asked two experts what the likely makeup of the Eurozone will be five years from now? Fifteen years from now? And what effect will any predicted change have on the European system as a whole? Here's what they said.
In five years, some of the new members of the enlarged EU, such as Estonia, will have joined the Eurozone. The UK may be in as well. The Eurozone thus will be more heterogeneous. The ECB will have introduced some rotating system for its decision-making, but its job to provide a stable money will become harder in the more heterogeneous environment. I expect that the ECB will have gained additional independence and self-confidence towards politics. This is absolutely necessary because conflicts between monetary policy at the European level and national political decision-making, for instance in fiscal policy, are likely to become more pronounced. By then, the EU will not have adjusted its intergovernmental decision-making process by shifting some power to the European Parliament and by changing the decision rules. A blockade in the form of intergovernmental decision-making with a negative impact on economic dynamics and growth cannot be ruled out. The necessary economic reforms in the labor market and the social security systems will not yet be done in three larger continental countries.
In fifteen years, the ECB will (hopefully) have won two or three larger battles between monetary policy and the national interest of major members of the Eurozone. The three major continental countries--Germany, France, and Italy--have reformed their labor markets and their social security systems making monetary policy easier in a more elastic economy. One of the concerns of the ECB will be to develop a monetary strategy for the aging societies on the continent where labor supply is likely to shrink.
Horst Siebert is President of the Kiel Institute of World Economics and a member of the German Council of Economic Advisors.
Political Union Will Be Sustained
In 2007, the EU will comprise twenty-five European nation states with ten more waiting in the wings. The euro will be legal tender for eighteen nations, including all "old" EU-15 members. It will account for 34-40 percent of the volume of the world financial markets and have reached a 23 percent share in foreign reserves. The convention, under the leadership of Giscard d'Estaing, will have moved forward the debate about the Union's final shape (not extending to Russia, that is, beyond the Urals), its international role--the single most important partner of the one superpower, the USA--and it will have initiated the transformation of European institutions to fit the bigger size of the club. The European Parliament will be limited to 500 seats and the "one man, one vote" principle will be better reflected in its membership. European parties will start emerging. A second chamber to represent the nations will be discussed. The European Commission will be a team with more constructive fields of action (less overlap, each more comprehensive, no more than twelve commissioners, that is, about half as many commissioners as member countries).
In 2017, the EU will consist of thirty-three nations; it will have 500 million inhabitants. The euro will be the currency throughout the Union. Even Switzerland and Norway will have joined. While the Americas and most of Asia will relate their currencies to the U.S. dollar, the Middle East, Africa, and the former CIS will relate their exchange rates to the euro and partially use the euro as parallel currency.
Political union will have been sustained. Foreign policy, security, and migration policies will be decided by the enlarged EU, not yet named the United States of Europe and still without a USE President, but tending to reflect the constitution of today's Switzerland--that is, with wide decentralization of authority in as many fields as makes sense. But Europol, Eurail, one first foreign language--simple English--will be reality, as will be European elite education on campuses such as Florence, Barcelona, Paris, Oxford and Berlin, as well as virtual universities.
Norbert Walter is Managing Director of Deutsche Bank Research of GmbH.
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|Publication:||The International Economy|
|Article Type:||Brief Article|
|Date:||Mar 22, 2002|
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