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European Policy Centre
Overcoming the economic and financial crisis
Seizing the opportunity for reforming the global economy
The European reaction to the crisis: the
European Economic Recovery Plan
19 November 2009
Dr. Fabian Zuleeg
• Fabian Zuleeg, Senior Policy Analyst, Political Economy Programme,
European Policy Centre (EPC)
• EPC: Brussels-based independent think-tank with around 400
members – multi-stakeholder
• Independence and transparency
• Mission: to make European integration work
• Focus on implementable policy recommendations
• Three programmes: integration & citizenship, Europe in the world,
Europe’s Political Economy (EPE)
• Within EPE, covering a wide range of topics, including economic
governance, Single Market, innovation, climate change/energy, better
regulation, Well-being 2030, health
Relevant EPC publications
• Where would we be now without the Euro?
• The stimulus package: how much is enough – and what for?
• The recovery plan revisited
• Where next for the Lisbon Agenda?
• Economic recovery to a greener economy: mobilising ICT-based innovations
The financial and economic crisis
• Long term underlying global imbalances: US
triple deficit, speculative bubbles
• Triggered by sub-prime mortgage
• Liquidity crisis in financial sector
• Spread from financial to real economy
• Recession in developed world, slow down in
emerging economies
Implications for policy
Need to supply liquidity
Taking over banks’ assets and liabilities
Decreasing interest rate
Fiscal stimulus
- Deficit and debt levels soaring
- Long term policies?
Why is there a need to act at EU level?
EU added value
Common shared objectives
Effectiveness and efficiency
EU actions – financial and economic crisis
• Stability & Growth Pact
• Broad economic policy guidelines
• Checking financial sector and fiscal
measures – Single Market
• ECB – interest rates, market interventions
• European recovery programme
Coordination, Cooperation or Common Action?
• Areas of core EU competences – monetary policy (Euro),
Single Market rules (competition, state aid, procurement)
• Positive role of SGP (deficits/debt) and Euro (currency
stability) in the run up to the crisis
• Areas of EU cooperation and coordination (OMC) – soft
• EU spending – limited budget, limited flexibility
• National spending and taxation + EU ‘toolbox’
• National public finances vs. SGP
Signs of weakening European commitment?
Protectionist ‘rhetoric’
National plans
Financial sector
State aids and credits
No appetite for ‘more Europe’ – e.g. EU budget
Within Eurozone – interest rate spread
Outside Eurozone – limited European role
Where to now?
• Crisis highlighted European and global economic
• But responses were predominantly national
• Crisis not yet over …
• Some worrying signs of weakening European
• Uncertainty about how to deal with the legacy of
the crisis (unemployment, debt, financial sector)
and at what level
Europe’s challenges
• The crisis and its consequences are not all the EU faces
• Europe faces a ‘perfect storm’
Resource scarcity
Climate Change
Income inequalities (within and between countries)
Cohesion and migration
• Strategic choices: budget review, post Lisbon Agenda
• Need to decide what we expect from Europe and how we
can sustain our economic and social models
Q&A + Discussion
Contact: [email protected]