Greece’s Path out of Crisis?

Experts regard new aid package as inadequate

Publication: European Economic Governance – Impulses for Crisis Prevention and New Institutions

At a special summit held on July 21, the heads of state and government in the eurozone and the International Monetary Fund agreed on a new rescue package for Greece. The private sector will shoulder part of the burden, broadening the menu of options for easing the crisis. Along with Ireland and Portugal, Greece was also granted reduced interest rates on its loans. With its decision, the eurozone moves closer to a system of issuing common bonds. Many observers see this as the right path for emerging from the debt crisis.

But can these measures alone protect the eurozone against future crises? The authors of the current volume in the Europe in Dialogue series have their doubts. They call for more ambitious reforms that protect the eurozone, and with it the entire EU, for the long term against debt crises and the deliberate withdrawal of individual member states. The Bertelsmann Stiftung invited five renowned economic and political analysts from member countries to assess the situation and make constructive recommendations for new tools and crisis management mechanisms.

The authors’ proposals range from regular monitoring of member states and broad financial supervisory rights at the EU level to an expansion of stabilization and prevention mechanisms. In their view, a realignment of economic policy coordination is absolutely essential.

The authors of this volume are Iain Begg of the London School of Economics and Political Science; Ansgar Belke, research director for international macroeconomics at the Berlin-based Institute for Economic Research (DIW); Sebastian Dullien, professor of international economics at the HTW Berlin; Daniela Schwarzer of the German Institute for International and Security Affairs (SWP); and Ramūnas Vilpišauskas of Vilnius University in Lithuania.

These analysts agree that putting effective measures in place will require tremendous effort on the part of policymakers. The past two years have shown how difficult it is to find a common denominator among the diverse interests of the 27 EU member states. Nevertheless, they must now all focus on their shared interest in the survival of the euro, the stability of the European Union and sound prospects for growth. The July 21 summit provides a glimmer of hope, but these experts call for more far-reaching reforms.

Seeking to contribute to the debate, the Bertelsmann Stiftung has published the volume European Economic Governance – Impulses for Crisis Prevention and New Institutions in the Europe in Dialogue series.