With the opening words "we were wrong", Guiliano Amato, former Prime Minister of Italy, recalled expectations at the time of the EMU construction, pointing out that economists and politicians at that phase of integration were keen to make progress and hopeful that imbalances and high levels of debt would subside through a deep process of convergence within the euro-area. "In the early years, the euro was a shield", but the expectations were not fulfilled and now the euro crisis offers an opportunity for further integration.
Amato argued that an intergovernmental approach is still present but communitarian integration will gather momentum through the integration of economic and fiscal policy as well. The concept of trust was raised for the first of many instances during the conference. The hostile response to austerity measures plainly shows that trust between the peoples of Europe is wavering. Politicians are faced with the goliath task of demonstrating that European integration benefits all and that its main focus is growth not austerity.

Amato further emphasised that a 19th century federal state is no longer adequate and two Europes with different speeds of integration will emerge more clearly than before, where some countries take part in selected aspects of integration while others subscribe to the entire packages.

Phillipe Gudin de Vallerin, Director of Macroeconomic Policies and European Affairs of France’s Ministry of the Economy, highlighted the integration achievements of the troublesome past years e.g. the ‘six-pack’, the European Semester or Fiscal Compact. He emphasised that a deep reform of economic governance will be politically difficult but is nonetheless necessary. The agenda must now include enforcing the new rules and even more importantly explaining them in order to gain citizens’ support.

To launch the next debate on the day’s agenda, moderator Daniel Gros, Director of CEPS, remarked on the necessity of coordination for the stability of the euro, in order to create, for example, robust financial markets. Gros further elaborated that coordination took place but not always positively, as he reminded the audience of the Franco-German cooperation to break the Stability and Growth Pact or when the real-estate bubble in Spain was widely ignored. Finally, Dr. Gros stirred up some controversy by stating that the possibility for a member country to leave the euro area is present and that Greece could vote to leave the eurozone. After a lively debate a metaphor was struck, comparing the exit option with a house: there might not be a proper door (explicit option) but there are windows to jump out of.

Weder Di Mauro highlighted in this context the role of the European Central Bank and confirmed that the ECB already functions as a transfer system and has helped to restrict the banking crisis. Correction of the macroeconomic imbalances, however, is far more difficult, according to Amato, since it depends not only on fiscal behaviour but on household and business behaviour as well. The panel members concluded that some progress had been achieved, displaying both an intergovernmental and communitarian approach, but that more lessons need to be drawn from past mistakes.

As Di Mauro pointed out, it is not enough “just to do anything, but to do the right thing”.

As stressed by Mr. Leterme, necessary actions would have to be taken in order to overcome the crisis. At the EU level more should be done to increase trust in the EU’s ability to halt the crisis and head off contagion from the periphery by reforming eurozone governance. Mr. Leterme acknowledged that progress had been made with the latest rescue package for Greece, but called for more action to establish a credible firewall to stop the crisis from spreading. He added that further credit tightening by banks should be avoided, while at the same time making the banking system more resilient to losses. At the national level, Mr. Leterme argued the need for further fiscal consolidation in some countries and continued efforts to step up structural reform of products and labour markets. This would enhance future potential growth, but, importantly, welldesigned structural reforms also have the ability to deliver short-term gains in growth performance, as shown in recent analysis by the OECD. The Commission could play a role by ensuring further strengthening of the internal market, in particular regarding services. H.E. William E. Kennard, in his address, underlined the importance of the EU to the US, not just as a major trading partner, but also as an ally more broadly on the international scene.

H.E. William E. Kennard, in his address, underlined the importance of the EU to the US, not just as a major trading partner, but also as an ally more broadly on the international scene. Concurring with the positive sentiments of Mr. Leterme, he also saw progress on several fronts. However, while the current direction and speed of reform were encouraging, he worried that the present sense of urgency throughout the EU will disappear, as soon as the crisis starts to abate. This concern conveyed his central message: an important post-crisis task will be to keep reforming and searching for a viable model that will ensure longterm growth.

Striking a positive note, Brazilian Ambassador Ricardo Neiva Tavares expressed no doubt that the euro would survive and went on to note the importance to Brazil of a prosperous EU. Listing some of the important economic achievements of Brazil in the last decade, he highlighted the success in reducing poverty in his home country. Even if the EU is more prosperous than Brazil, poverty is an issue that the EU has to take seriously. He cited Eurostat figures showing that more than 100 million people in the EU are at risk of poverty and social exclusion. And while acknowledging the differences in starting points and institutional structures, he suggested that this might be an area where the EU should study the Brazilian experience.

The Turkish Ambassador, Izzet Selim Yenel, observed that the euro crisis is followed very closely and with intense interest in his country. He too expressed confidence that the euro would survive and also predicted that the crisis would ultimately lead to a deeper union with more solidarity among members. He stressed that, from his point of view, Greece will have to be saved and kept within the union, suggesting that it was of key interest to Turkey to see how the EU handles a member in grave difficulties.

Jesper Berg, Head of Financial Stability at Nykredit, explained how Denmark’s fixed exchange rate to the euro has disciplined the country to limit debt increases and stabilised the balance of payments in order to sustain the exchange rate. Thus, similar welldesigned mechanisms could facilitate rebalancing in the eurozone. Jan Zahradil, a Czech MEP, objected to treating ‘noneurozone countries’ as one coherent group, since there is a clear split between ‘old non-eurozone countries’, i.e. the UK, Denmark and Sweden, and the ‘new noneurozone countries’ such as the Czech Republic. Zahradil asserted that New Europe was no longer eager to join the euro area and it had become apparent that the “eurozone is not for everyone”. The Czech Republic will not sign the Fiscal Compact, but public expenditure will be cut by national forces while at the same time reducing dependence on the eurozone. Thus, the Czech Republic contributes by showing an alternative route in contrast to deeper integration.