Economic Globalization and Governance by Unknown

Author:Unknown
Language: eng
Format: epub
ISBN: 9783030532659
Publisher: Springer International Publishing

3 EMU: From an Open Partnership to the Core of European Integration

The UK’s preferences became incompatible with EMU’s economic agenda and the EU’s political sustainability, ever since the move from a single market to an EMU.7 The reason is that with EMU, the economic union part, which includes the internal market, can no longer be treated as stand-alone and independent of the monetary union. Rather, EMU’s good functioning requires that economic union go hand in hand with monetary union, together with the necessary coordination to sustain the latter. The UK preference for a stand-alone economic union ultimately put it on a collision course with EU integration objectives and, in particular, Eurozone policies (Bongardt and Torres 2017).8

That clash of preferences is rooted in the fact that the internal market can no longer be treated as static. For the Eurozone to work well, it is in the legitimate interest of current and future members that the economic union be deepened with regard to Eurozone requirements—these include, after Brexit, all EU member states except Denmark, which benefited from an opt-out (although Denmark follows all the Eurozone’ decisions in terms of monetary policy, its self-exclusion implying that it only does not participate in the decision making). The increased interdependencies between monetary union’s members and enhanced coordination needs implied a qualitative change in European integration.

While obviously important for the sustainability of the monetary union, the issue goes much beyond and to the core of the integration process. The EU needs to complete EMU, notably through more coordinated economic, fiscal, and budgetary policies and a banking and capital markets union (Jones and Torres 2016), in order to deliver positive (economic, environmental, and social) results to the entire Union, and therefore sustain the political integration project.

The UK preferences and interest in the economic union part (highlighted by the specificity of, and dependency on, its financial sector concentrated in the City of London) became incompatible with EMU sustainability, the good functioning of European institutions and their response to the challenges facing the EU. The UK had not only opted out of the monetary union altogether but it also refused to take part in the economic union’s deepening, thus hindering the necessary strengthening of its institutions and governance. The UK did not participate in the Euro Plus Pact and even vetoed the Treaty on Stability, Coordination and Governance in Economic and Monetary Union, which in turn required other member states to settle for an intergovernmental pact beyond the Union framework, at a time of great Eurozone fragility and perils for its survival.

In the sovereign debt crisis, the UK did not participate in the newly created institutions of the European Financial Stability Fund (EFSF) and the European Stability Mechanism (EMS), while also not providing solidarity to the Eurozone member states most affected by the crisis. It only accepted the ESM in exchange for the European Financial Stability Mechanism (EFSM), which involves a guarantee of the EU budget for granting loans, no longer being used to support Eurozone countries. It only

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