Open Workshop by Prof. Bruno Dallago: The institutional crisis of the Eurozone

The Eurozone is facing a permanent rift between vulnerable and resilient member countries. The rift is due to the institutional incompleteness of the Eurozone and the restrictive policies initially adopted to fight the crisis, together with the lack of national reforms. Due to its long-lasting persistence and its permanent negative consequences, the rift became economically and politically dangerous for the monetary union. The ECB monetary attitude became expansionary since 2013 and the EU fiscal rules moved towards less austere and more flexible stance since 2014. This allowed the European Union to gain time. However, external and internal events added significant economic, financial and political stress to the monetary integration.

After the European elections of 2019 the landscape looks more open to significant changes, but diffused uncertainty on the precise direction and contrasting positions abound, while economic perspectives are getting gloomy. The paper analyzes the causes and consequences of the division between resilient and vulnerable countries within the Eurozone, looks at the consequences of the ongoing internal and external stress and considers the main issues at stake in the present situation. The paper concludes that the Eurozone has to choose soon among three options: proceed towards a political unification; accept the idea of a multi-track Union; or base fiscal parameters on each country’s distance from the Eurozone reference frontier to support reforms and economic recovery.

Bruno Dallago, PhD, is Professor of Economics at the Department of Economics and Management, University of Trento, Italy. He was visiting professor at various universities, including the University of California at Berkeley, USA, the University of North Carolina at Chapel Hill, Hitotsubashi University, Zhejian University, Kyoto University, the University of Pécs, Tshwane University of Technology, Corvinus University of Budapest, Zhejiang University. He was the president of the European Association for Comparative Economic Studies and is a member of the International Advisory Board of the Institute of Economics of the Hungarian Academy of Sciences. His research interests include the European Union, comparative economics, the transforming economies of Central and East Europe, SMEs and entrepreneurship, local development. He is the author and editor of several scholarly books and journal articles, including One Currency, Two Europe (World Scientific, 2016), Transformation and Crisis in Central and Eastern Europe: Challenges and Prospects (with Steven Rosefielde, Routledge, 2016) and Entrepreneurship and local economic development. A comparative perspective on entrepreneurs, universities, and governments, (edited with E. Tortia, Routledge, 2018).