Three structural reforms remain central for the euro in 2013

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Three structural reforms remain central for the euro in 2013

As the year draws to a close, it is time to reflect on the economic policy priorities for 2013. I would identify three structural reform areas that ar

Publishing date: 19 December 2012
Authors: Guntram B. Wolff

As the year draws to a close, it is time to reflect on the economic policy priorities for 2013. I would identify three structural reform areas that are central to the success of the euro… and one less structural measure.

The first one are all those structural reforms that are needed to adjust competitiveness and macroeconomic imbalances. During 2012, quite some progress has been made on this front. Labour market reforms have been initiated, unit labour costs have adjusted and current account deficits have come down. Current account deficits have come down not only because of a fall in imports but the increases in exports have been quite significant in a number of countries. Continuing these structural reform efforts will remain a high priority to achieve adjustment and generate growth. Europe needs to have policies promoting growth and innovation and increasing the efficiency of our economies. Losing momentum on these reforms would be a big mistake.

The second reform area is to complete the banking union structure. It has been a big achievement of 2012 to agree on a single supervisor. Heads of state and government have also agreed on the need to put in place a single resolution mechanism with the appropriate resources. It is of great importance that the structure of the banking union consisting of bank supervision, bank resolution and appropriate resources is completed. A banking union with a common supervisor only will be incomplete and not achieve the clearly stated aim of the June summit to break the doom-loop between banks and sovereigns.

The third reform area is related to the political integration in Europe. This is a long-term project on which I do not expect concrete results for 2013. Nevertheless, a sincere reflection process on legitimacy and effectiveness of EU policies needs to start. The central question is how national sovereignty can be shared with the European partners beyond what is done already now. This deepening of political integration will be necessary to move ahead further with the fiscal union that ultimately is required for a monetary union.

Finally, these structural reforms will have to be accompanied by the appropriate macroeconomic policies to re-launch economic growth in the short run. The euro area needs the right demand policies to end the recession. This includes revisiting the EU budget to promote growth in the South of Europe.

About the authors

Guntram B. Wolff

Guntram Wolff is a Senior fellow at Bruegel. He is also a Professor of Economics at the Université libre de Bruxelles (ULB).

From 2022-2024, he was the Director and CEO of the German Council on Foreign Relations (DGAP) and from 2013-22 the director of Bruegel. Over his career, he has contributed to research on European political economy, climate policy, geoeconomics, macroeconomics and foreign affairs. His work was published in academic journals such as Nature, Science, Research Policy, Energy Policy, Climate Policy, Journal of European Public Policy, Journal of Banking and Finance. His co-authored book “The macroeconomics of decarbonization” is published in Cambridge University Press.

An experienced public adviser, he has been testifying twice a year since 2013 to the informal European finance ministers’ and central bank governors’ ECOFIN Council meeting on a large variety of topics. He also regularly testifies to the European Parliament, the Bundestag and speaks to corporate boards. In 2020, ranked him one of the 28 most influential “power players” in Europe. From 2012-16, he was a member of the French prime minister’s Conseil d’Analyse Economique. In 2018, then IMF managing director Christine Lagarde appointed him to the external advisory group on surveillance to review the Fund’s priorities. In 2021, he was appointed member and co-director to the G20 High level independent panel on pandemic prevention, preparedness and response under the co-chairs Tharman Shanmugaratnam, Lawrence H. Summers and Ngozi Okonjo-Iweala. From 2013-22, he was an advisor to the Mastercard Centre for Inclusive Growth. He is a member of the Bulgarian Council of Economic Analysis, the European Council on Foreign Affairs and advisory board of Elcano. He is also a fellow at the Kiel Institute for the World Economy.

Guntram joined Bruegel from the European Commission, where he worked on the macroeconomics of the euro area and the reform of euro area governance. Prior to joining the Commission, he worked in the research department at the Bundesbank, which he joined after completing his PhD in economics at the University of Bonn. He also worked as an external adviser to the International Monetary Fund. He is fluent in German, English, and French. His work is regularly published and cited in leading media.