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Volume LI 2 - 2017

Institutional and Economic Reform Process in Europe: An Historical Perspective

Luca Einaudi, pp. 55-79
Abstract
The article compares the challenges faced by Europe in reconstructing after World War I and the new ones on similar issues encountered in 2017, after ten years of financial, economic and political crises. Such a comparison is developed not only about the reconstruction of its infrastructures, but also the political reorganization of the Continent and its Union, the reform of the European fiscal and monetary constitution, and how it deals with the twin demographic and migratory challenge. The solutions proposed a hundred years ago and their outcomes are briefly discussed, along with the possible solutions discussed today and their possible consequences.
The excessive rigidity of monetary and budgetary rules had negative influence in the reconstruction of the institutional framework in the 1920’s, contributing to the end of the gold exchange standard, and today’s fiscal rules must avoid an excessively restrictive bias on demand. Regulated labour migration is part of the solution of Europe’s demographic problems, but it is difficult to handle. Cooperation must be reinforced in dealing with emergencies and refugees and contain irregular flows and manage expectations and fears, while fostering integration. Infrastructural investment remains weak and the Junker plan has not provided the additional push needed, because budgetary constrains remain, the complexity of the financial, legal and administrative process have become structural, and Public Private Partnerships are ultimately a more expensive way to produce public investment.
While clear cut, definitive solutions to the various problems identified appear unlikely, the endurance of the European project should not be underestimated. There is a real capacity of institutions to withstand difficulties and the commitment of the vast majority of European governments to sustain or to advance the European project and the Euro, even if a truly federalist development of Europe is unlikely and not strictly necessary.
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