The UK's departure from the European Union (EU) will profoundly affect European integration. ... more The UK's departure from the European Union (EU) will profoundly affect European integration. Although many have lamented the blow that this presents to the EU, Brexit also presents a window of opportunity for it to consider its reform options after the UK's exit, including policies related to Economic and Monetary Union (EMU). Although the UK famously declined participation in EMU and retained the pound as its currency, this policy brief argues that Brexit will affect the future trajectory of EMU in several ways. First, it will place pressure on euro-outs to adopt the euro as their currency. Second, it will alter existing alliances within the EU, including between the euro-ins and euro-outs. Third, Brexit will prompt changes in EU legislation to account for the departure of the UK, thus opening the door to reforms to strengthen European financial market integration and possibly even fiscal cooperation.
Introduction: The euro area was routinely criticized for its handling of the sovereign debt crisi... more Introduction: The euro area was routinely criticized for its handling of the sovereign debt crisis, charged with doing ‘too little, too late’ in order to alleviate market pressure. Its inaction / delayed reaction may have worsened the impact of the crisis. Within the context the European Central Bank emerged as an indispensable institution in euro area governance. ECB President Mario Draghi is even credited with saving the euro thanks to his speech in July 2012 in which he vowed to do “whatever it takes.” This article considers the evolving role of the ECB in euro area governance, specifically financial supervision. Whereas at the start of the crisis, the ECB’s increasingly important role in crisis management was termed as largely incremental (cf Salines et al. 2012; Schwarzer 2012), the ECB has increased its capacity and its competences significantly since onset of the global financial crisis. From a technical standpoint, this decision could be viewed as a natural outgrowth of cent...
Executive Summary > Although the United Kingdom obtained an optout from Economic and Monetary ... more Executive Summary > Although the United Kingdom obtained an optout from Economic and Monetary Union (EMU), its departure from the European Union (EU) will have important effects on EMU’s development. > These effects will be felt through three primary channels: > First, Brexit will create more pressure on the euro-outs to adopt the euro; > Second, it will alter existing alliances within the EU that by extension will affect the trajectory of euro area integration; > Finally, EU legislative reforms post-Brexit open up windows of opportunity to make the euro area more robust.
This chapter explores the provisions of the Withdrawal Agreement on the financial settlement — th... more This chapter explores the provisions of the Withdrawal Agreement on the financial settlement — the money the UK shall pay to the EU in connection to its departure. The financial settlement for the withdrawal of the UK from the EU posed numerous challenges to both parties. For the UK, internal divisions in the ruling Conservative party made it difficult to develop a coherent position. On the one hand, Brexit hardliners saw continued contributions to the EU budget after Brexit as a betrayal of the referendum result. On the other hand, the so-called Remainers favoured maintaining close relations with the EU and paying to ensure access to its markets and various programmes. For the EU, Brexit threatened the budgetary agreement that had been carefully negotiated in the context of the 2014–2020 multi-annual financial framework. Moreover, the exit of the UK from the EU ushers in a new era. Because the UK was, despite its rebates, one of the largest net contributors to the EU budget, Brexit...
This contribution applies the theoretical framework developed by Schoeller and Falkner (this issu... more This contribution applies the theoretical framework developed by Schoeller and Falkner (this issue) to the case of Belgium. First, it examines Belgium’s preferences and the status quo before and after the financial crisis, juxtaposed against Germany’s preferred outcomes. Belgium has traditionally favoured more integration, leading to Belgium’s strategy of co-shaping and pace-setting in regards to monetary integration through persuasion, cultivating alliances, and brokering compromises that satisfied Germany’s interests in EMU versus those of the European Commission and France. The global financial crisis changed Belgium’s strategy, as it became constrained by the effects of the crisis on its economy and the domestic political turmoil that ensued. Belgium went from a pre-crisis pace-setter to a fence-sitter, relying on the persuasion of its allies to convince Germany to agree to reform the architecture of euro area governance. Finally, this contribution considers the institutional fabric of Belgium’s relation to the hegemon. This is relatively weak between Belgium and Germany, making multilateral settings the preferred forum rather than bilateral. Nevertheless, Belgium’s famous capacity for forging compromises among disparate interests was demonstrated through the diplomacy of former Belgian Prime Minister Herman Van Rompuy as the European Council’s first full-time president.
ABSTRACT At the start of Economic and Monetary Union (EMU), the ECB’s sui generis nature as one o... more ABSTRACT At the start of Economic and Monetary Union (EMU), the ECB’s sui generis nature as one of the most independent central banks of an entity lacking political union evoked concerns that it would be both too constrained (limited mandate) and enjoy too much discretion (limited ex-post accountability) in comparison to central banks like the US Federal Reserve. Were these concerns justified? Using a principal-agent framework, this contribution contrasts the ECB with the Federal Reserve in their reactions to the global financial crisis and how the available accountability mechanisms were used. Early concerns that the ECB would pursue only price stability at the expense of other economic objectives were exaggerated, though criticism about its accountability proved prescient.
This chapter contrasts the European Parliament’s (EP’s) Monetary Dialogue with the European Centr... more This chapter contrasts the European Parliament’s (EP’s) Monetary Dialogue with the European Central Bank with the (relatively) new Economic Dialogue, a forum launched in 2011 to promote greater transparency and accountability in relation to European Union (EU) economic governance. It charts the creation of the Monetary Dialogue and the Economic Dialogue, respectively, and evaluates their implementation. Although the Economic Dialogue is a welcome addition to the EU’s economic governance architecture, its effectiveness has been blunted by institutional constraints as well as by the EP’s approach to this forum. The chapter concludes by putting forward ideas for reforming the Economic Dialogue with a view to enhancing the democratic oversight of Economic and Monetary Union (EMU). In particular, it calls for the creation of an EP Subcommittee for Euro Area Oversight.
The European Central Bank enjoys a large degree of independence due to the academic and policy co... more The European Central Bank enjoys a large degree of independence due to the academic and policy consensus that independent central banks achieve better results in the pursuit of price stability. Since the global financial crisis, however, ECB activities now includes broader objectives with redistributive consequences. How can we explain this mission creep? This article considers the expansion of the ECB’s role in euro area governance over the last decade. Using a neofunctionalist framework, it shows the weakness of the traditional argument of the ECB as a technocratic actor and demonstrates how the ECB became one of the most influential institutions in the EU beyond monetary policymaking.
This article applies the governance typology used in this special issue to the evolution of euro ... more This article applies the governance typology used in this special issue to the evolution of euro area governance. The article begins with a description of Economic and Monetary Union’s original governance structure, with third order governance (shared norms) present in varying degrees in monetary, financial and fiscal governance. While a shared consensus on the importance of an independent central bank to pursue price stability allowed for the creation of the European Central Bank, euro area governance was otherwise limited to the coordination of national policies. Since the crisis, shifting norms (third order governance) allowed for the creation of new bodies (e.g. the European Stability Mechanism and the Single Supervisory Mechanism) and the expansion of the powers of existing institutions (particularly the ECB). In areas where no normative changes occurred (fiscal and economic policy coordination), second order governance has been marked by incremental changes to existing institu...
This contribution begins with a summary of the current state of euro area governance in the conte... more This contribution begins with a summary of the current state of euro area governance in the context of crisis management, the European semester, and banking union in order to appreciate the ramification of consolidating some of these roles into a single post. It continues with an overview of how thinking about a European Finance Minister has changed over the last few years, followed by the current Commission proposal. The final section analyses the potential impact of a European Finance Minister on euro area governance. The post would primarily have a coordinating role unless additional budgetary resources are allotted to the accompanying European Finance Ministry and/or the policy instruments themselves are reformed. Pursuing the creation of this post should be postponed until the larger issues related to the budget (both its size and how it would be used) are settled. The European Union has recently emerged from a decade of economic crisis. The global financial crisis morphed into...
Although the UK enjoyed an opt-out from EMU, Chang explains that it was influential in its develo... more Although the UK enjoyed an opt-out from EMU, Chang explains that it was influential in its development. The UK successfully defended its interests in financial services despite EMU. Moreover, it often acted as a shield for non-Eurozone countries. Therefore, the withdrawal of the UK from the EU is likely to have an impact within the EMU, altering interstate alliances, changing the balance between euro-ins and euro-outs, and reducing the need to act outside the legal framework of the EU. In addition, the shortfall in the EU budget resulting from the end of the UK financial contributions may change the stakes in fiscal negotiations, creating room for the establishment of a Eurozone fiscal capacity. Finally, it is uncertain to what extent post-Brexit the EU may be able to push forward with the Capital Markets Union and whether the UK may stay connected to it.
The UK's departure from the European Union (EU) will profoundly affect European integration. ... more The UK's departure from the European Union (EU) will profoundly affect European integration. Although many have lamented the blow that this presents to the EU, Brexit also presents a window of opportunity for it to consider its reform options after the UK's exit, including policies related to Economic and Monetary Union (EMU). Although the UK famously declined participation in EMU and retained the pound as its currency, this policy brief argues that Brexit will affect the future trajectory of EMU in several ways. First, it will place pressure on euro-outs to adopt the euro as their currency. Second, it will alter existing alliances within the EU, including between the euro-ins and euro-outs. Third, Brexit will prompt changes in EU legislation to account for the departure of the UK, thus opening the door to reforms to strengthen European financial market integration and possibly even fiscal cooperation.
Introduction: The euro area was routinely criticized for its handling of the sovereign debt crisi... more Introduction: The euro area was routinely criticized for its handling of the sovereign debt crisis, charged with doing ‘too little, too late’ in order to alleviate market pressure. Its inaction / delayed reaction may have worsened the impact of the crisis. Within the context the European Central Bank emerged as an indispensable institution in euro area governance. ECB President Mario Draghi is even credited with saving the euro thanks to his speech in July 2012 in which he vowed to do “whatever it takes.” This article considers the evolving role of the ECB in euro area governance, specifically financial supervision. Whereas at the start of the crisis, the ECB’s increasingly important role in crisis management was termed as largely incremental (cf Salines et al. 2012; Schwarzer 2012), the ECB has increased its capacity and its competences significantly since onset of the global financial crisis. From a technical standpoint, this decision could be viewed as a natural outgrowth of cent...
Executive Summary > Although the United Kingdom obtained an optout from Economic and Monetary ... more Executive Summary > Although the United Kingdom obtained an optout from Economic and Monetary Union (EMU), its departure from the European Union (EU) will have important effects on EMU’s development. > These effects will be felt through three primary channels: > First, Brexit will create more pressure on the euro-outs to adopt the euro; > Second, it will alter existing alliances within the EU that by extension will affect the trajectory of euro area integration; > Finally, EU legislative reforms post-Brexit open up windows of opportunity to make the euro area more robust.
This chapter explores the provisions of the Withdrawal Agreement on the financial settlement — th... more This chapter explores the provisions of the Withdrawal Agreement on the financial settlement — the money the UK shall pay to the EU in connection to its departure. The financial settlement for the withdrawal of the UK from the EU posed numerous challenges to both parties. For the UK, internal divisions in the ruling Conservative party made it difficult to develop a coherent position. On the one hand, Brexit hardliners saw continued contributions to the EU budget after Brexit as a betrayal of the referendum result. On the other hand, the so-called Remainers favoured maintaining close relations with the EU and paying to ensure access to its markets and various programmes. For the EU, Brexit threatened the budgetary agreement that had been carefully negotiated in the context of the 2014–2020 multi-annual financial framework. Moreover, the exit of the UK from the EU ushers in a new era. Because the UK was, despite its rebates, one of the largest net contributors to the EU budget, Brexit...
This contribution applies the theoretical framework developed by Schoeller and Falkner (this issu... more This contribution applies the theoretical framework developed by Schoeller and Falkner (this issue) to the case of Belgium. First, it examines Belgium’s preferences and the status quo before and after the financial crisis, juxtaposed against Germany’s preferred outcomes. Belgium has traditionally favoured more integration, leading to Belgium’s strategy of co-shaping and pace-setting in regards to monetary integration through persuasion, cultivating alliances, and brokering compromises that satisfied Germany’s interests in EMU versus those of the European Commission and France. The global financial crisis changed Belgium’s strategy, as it became constrained by the effects of the crisis on its economy and the domestic political turmoil that ensued. Belgium went from a pre-crisis pace-setter to a fence-sitter, relying on the persuasion of its allies to convince Germany to agree to reform the architecture of euro area governance. Finally, this contribution considers the institutional fabric of Belgium’s relation to the hegemon. This is relatively weak between Belgium and Germany, making multilateral settings the preferred forum rather than bilateral. Nevertheless, Belgium’s famous capacity for forging compromises among disparate interests was demonstrated through the diplomacy of former Belgian Prime Minister Herman Van Rompuy as the European Council’s first full-time president.
ABSTRACT At the start of Economic and Monetary Union (EMU), the ECB’s sui generis nature as one o... more ABSTRACT At the start of Economic and Monetary Union (EMU), the ECB’s sui generis nature as one of the most independent central banks of an entity lacking political union evoked concerns that it would be both too constrained (limited mandate) and enjoy too much discretion (limited ex-post accountability) in comparison to central banks like the US Federal Reserve. Were these concerns justified? Using a principal-agent framework, this contribution contrasts the ECB with the Federal Reserve in their reactions to the global financial crisis and how the available accountability mechanisms were used. Early concerns that the ECB would pursue only price stability at the expense of other economic objectives were exaggerated, though criticism about its accountability proved prescient.
This chapter contrasts the European Parliament’s (EP’s) Monetary Dialogue with the European Centr... more This chapter contrasts the European Parliament’s (EP’s) Monetary Dialogue with the European Central Bank with the (relatively) new Economic Dialogue, a forum launched in 2011 to promote greater transparency and accountability in relation to European Union (EU) economic governance. It charts the creation of the Monetary Dialogue and the Economic Dialogue, respectively, and evaluates their implementation. Although the Economic Dialogue is a welcome addition to the EU’s economic governance architecture, its effectiveness has been blunted by institutional constraints as well as by the EP’s approach to this forum. The chapter concludes by putting forward ideas for reforming the Economic Dialogue with a view to enhancing the democratic oversight of Economic and Monetary Union (EMU). In particular, it calls for the creation of an EP Subcommittee for Euro Area Oversight.
The European Central Bank enjoys a large degree of independence due to the academic and policy co... more The European Central Bank enjoys a large degree of independence due to the academic and policy consensus that independent central banks achieve better results in the pursuit of price stability. Since the global financial crisis, however, ECB activities now includes broader objectives with redistributive consequences. How can we explain this mission creep? This article considers the expansion of the ECB’s role in euro area governance over the last decade. Using a neofunctionalist framework, it shows the weakness of the traditional argument of the ECB as a technocratic actor and demonstrates how the ECB became one of the most influential institutions in the EU beyond monetary policymaking.
This article applies the governance typology used in this special issue to the evolution of euro ... more This article applies the governance typology used in this special issue to the evolution of euro area governance. The article begins with a description of Economic and Monetary Union’s original governance structure, with third order governance (shared norms) present in varying degrees in monetary, financial and fiscal governance. While a shared consensus on the importance of an independent central bank to pursue price stability allowed for the creation of the European Central Bank, euro area governance was otherwise limited to the coordination of national policies. Since the crisis, shifting norms (third order governance) allowed for the creation of new bodies (e.g. the European Stability Mechanism and the Single Supervisory Mechanism) and the expansion of the powers of existing institutions (particularly the ECB). In areas where no normative changes occurred (fiscal and economic policy coordination), second order governance has been marked by incremental changes to existing institu...
This contribution begins with a summary of the current state of euro area governance in the conte... more This contribution begins with a summary of the current state of euro area governance in the context of crisis management, the European semester, and banking union in order to appreciate the ramification of consolidating some of these roles into a single post. It continues with an overview of how thinking about a European Finance Minister has changed over the last few years, followed by the current Commission proposal. The final section analyses the potential impact of a European Finance Minister on euro area governance. The post would primarily have a coordinating role unless additional budgetary resources are allotted to the accompanying European Finance Ministry and/or the policy instruments themselves are reformed. Pursuing the creation of this post should be postponed until the larger issues related to the budget (both its size and how it would be used) are settled. The European Union has recently emerged from a decade of economic crisis. The global financial crisis morphed into...
Although the UK enjoyed an opt-out from EMU, Chang explains that it was influential in its develo... more Although the UK enjoyed an opt-out from EMU, Chang explains that it was influential in its development. The UK successfully defended its interests in financial services despite EMU. Moreover, it often acted as a shield for non-Eurozone countries. Therefore, the withdrawal of the UK from the EU is likely to have an impact within the EMU, altering interstate alliances, changing the balance between euro-ins and euro-outs, and reducing the need to act outside the legal framework of the EU. In addition, the shortfall in the EU budget resulting from the end of the UK financial contributions may change the stakes in fiscal negotiations, creating room for the establishment of a Eurozone fiscal capacity. Finally, it is uncertain to what extent post-Brexit the EU may be able to push forward with the Capital Markets Union and whether the UK may stay connected to it.
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Papers by Michele Chang