IMF Survey: Crisis is Opportunity for Deeper, Faster Integration

IMF News, March 29, 2010

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Format: TV panel debate titled “Twenty years of Transformation in Central and Eastern Europe: Fulfilling the European Promise.”
Location: Royal Castle in Warsaw.
Broadcast: Will be broadcast by France 24 on April 6 and will also be available on imf.org.
Publication: IMF Survey online, March 29, 2010.
Panelists: IMF Managing Director Dominique Strauss-Kahn, former Latvian President Vaira Vike-Freiberga, editor-in-chief of Gazeta Wyborcza Adam Michnik, and historian Jacques Rupnik.

Single currency introduced in 1999.
Eurozone defined as the 16 members of the European Union that share the euro.
Panel consensus: European integration has produced “incredible achievements” and is “the best idea Europe has had in 2000 years,” per Michnik.

Findings

Crisis has exposed weaknesses in the institutional and policy framework; current crisis represents an opportunity to address these weaknesses.
“When you build a single currency, the natural step that follows should be a coordinated economic policy,” Strauss-Kahn said.
“The crisis shows when the weather is quiet, existing institutions work well enough. But when you have a storm, then weaknesses of this institution appear clearly,” Strauss-Kahn added.

Policy recommendations and actions urged by panelists

Better and stronger coordination of economic policy across Europe.
Implement and better enforce the Stability and Growth Pact; its rules must be better enforced, per Strauss-Kahn.
Strengthen region-wide surveillance.
Europeans should think in terms of shared research and development and innovation policies.
Implementation of the Lisbon agenda cannot be left to the individual good will of countries.
No double standards in implementation for different sets of countries.
Eurozone countries should be faithful to their commitments to EU members in emerging Europe.

Political dimension

The challenge is more political than technical; use the crisis as an opportunity for deeper and faster integration.
Concern about complacency: “Europeans have been complacent. Eurozone countries have been complacent. If we had followed up on the Lisbon strategy, we would be ahead of the game,” Vike-Freiberga said.

Warning against being inward-looking: “India, China, the United States and other parts of the world are growing fast. If Europe is to retain its place in the global economy, it too needs to move fast,” Strauss-Kahn said.
The panel urged moving ahead with deeper and faster integration to maintain Europe’s global economic position.

IMF stance on Greece: Strauss-Kahn said the IMF stands ready to help if asked by the government but is not seeking to be asked; he hoped the Greek government would manage without IMF assistance.
Rupnik: Greek crisis dealt a serious blow to Europe’s image but offers an opportunity to spur political trust, transparency, and commitment; integration “is not a linear process.”
Audience questions covered:
- Costs of addressing the demographic shock and ageing in Europe and whether there was a “hidden debt.”
- Whether Europe should rely more on market discipline and less on the Maastricht Treaty.
- What specific measures are needed to strengthen economic coordination in Europe.
- Whether more powers should be transferred to the Commission, for instance in competition and deregulation.

IMF Survey online, March 29, 2010.