Is the euro sustainable, Germany
Considerable actions at the EU level and by the European Central Bank have been taken to make the Eurozone economically resilient. While the economic risks may have been banned, electoral events in recent years, including the Brexit vote, have made it clear that the euro system might come under attack from other directions. The probability of such political shocks occuring might have diminished in recent years, but the possibility of such events to threaten the system cannot be completely excluded. It is therefore important to understand the adverse impacts that such events can entail. This high-level international conference addresses the question of political resilience, the devastating economic experiences from comparable events in the past, and actions and remedies that should be taken in case such events occur in the future. Organizers Kai A. Konrad received his PhD from the Ludwig Maximilian University of Munich (1990). He was a professor of public economics at the Freie Universität Berlin (until 2009). He is director at the Max Planck Institute for Tax Law and Public Finance in Munich (since 2011) and a distinguished affiliate professor at. He was the chairman of the Council of Scientific Advisors to the German Ministry of Finance (2011 2014). Jörg Rocholl received a PhD in finance and economics from Columbia Business School in New York (2004). He is president of (since 2011), professor and EY Chair in Governance and Compliance (since 2010). He is a member of the Economic Advisory Board to the German Ministry of Finance (since 2011). 1
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Program 10:15 registration 10:45 welcome and opening Kai A. Konrad, MPI for Tax Law and Public Finance Jörg Rocholl, 11:00 session I - Keynotes Stabilizing the euro: Where do we stand? Christoph M. Schmidt, RWI - Leibniz Institute for Economic Research Political risk: A view from public opinion research Bruce Stokes, Pew Research Center 12:15 lunch 13:30 session II - Keynote How to cope with target imbalances Hans-Werner Sinn, ifo Institute - Leibniz Institute for Economic Research at the LMU Munich 14:30 Panel I - What can we learn from history? moderator: Philip Plickert, Frankfurter Allgemeine Zeitung Luca Einaudi The Latin Monetary Union Albrecht Ritschl How the aftermath of a Eurozone breakup could look like if history is any guide Jeromin Zettelmeyer The Argentinian disaster/experience 16:00 coffee break 16:30 Panel II - Thinking about the unthinkable moderator: Ursula Weidenfeld, Economics Journalist Clemens Fuest Costas Lapavitsas Xavier Ragot [Art 50] ways to leave the euro does the Eurozone need an exit clause? How and why did Greece stay in the EMU? Saving the Eurozone. Why and how? 18:00 closing Kai A. Konrad, MPI for Tax Law and Public Finance Jörg Rocholl, 18:15 Drinks reception 3
Session I 11:00-12:15 Keynote Stabilizing the euro: Where do we stand? Christoph M. Schmidt Christoph M. Schmidt received a PhD from Princeton University (1991) and obtained his habilitation from the University of Munich (1995). He was a professor at the University of Heidelberg (until 2002) and then became a professor of economics and econometrics at Ruhr University Bochum. He is president of the RWI Leibniz Institute for Economic Research (since 2002) and is serving as member (since 2009) and chairman (since 2013) of the German Council of Economic Experts (GCEE). In its coalition agreement, the prospective new grand coalition German government is providing strong indications that European issues will take center stage on its political agenda. In principle, this is good news for European integration. Yet, the quality of the actual steps taken under this heading will be decisive for its success. Ultimately, only an incentive-compatible European architecture will constitute a sustainable engine of peace and prosperity. The key to ascertaining this stable architecture will be the adamant insistence on a healthy balance between principles and pragmatism. The current political discourse on reforming the Eurozone architecture is highly polyphonic, though, and therefore offers little guidance. In the reality of political developments, this architecture has been transformed in the direction of the concept proposed by the GCEE as Maastricht 2.0. By contrast, prominent political rhetoric has emphasized quite different themes, evidenced for instance by the Five Presidents Report. This presentation aims at sorting out this variegated argumentative spectrum. 4
and what if it not? Session I 11:00-12:15 Keynote Political risk: A view from public opinion research Bruce Stokes Bruce Stokes is director of global economic attitudes at the Pew Research Center, where he assesses public views about economic conditions, foreign policy, and values. He is also a non-resident fellow at the German Marshall Fund and an associate fellow at Chatham House. He is the former international economics correspondent for the National Journal, a former senior transatlantic fellow at the German Marshall Fund, and a former senior fellow at the Council on Foreign Relations, where he is a member. Stokes is author of the recent Pew Research Center studies: U.S. Image Suffers as Publics Around the World Question Trump s Leadership; Post Brexit, Europeans More Favorable Toward EU; Globally, Broad Support for Representative and Direct Democracy. Stokes is a graduate of Georgetown University s School of Foreign Service and Johns Hopkins University s School for Advanced International Studies. The reputation of the European Union and Europeans commitment to the European Project suffered in the wake of the global financial crisis a decade ago, especially in southern Europe. The economic downturn only reinforced Europeans frustration with Brussels inefficiency and intrusiveness. Nevertheless, support for the euro remained strong in most euro area countries, with the exception of Italy. And Europeans also continued to believe that the European Project had contributed to peace in Europe, reaffirming the founding ideals of the European Community. The refugee crisis and the perceived mishandling of this issue have led to new public criticism of the EU. This challenge to European solidarity has fueled the rise of rightwing populist parties, whose adherents are often Euroskeptical. At the same time, while in none of the euro area countries does the population want to leave the EU, strong majorities now express a desire for more direct voting through referenda on issues of major national importance, including on continued participation in the European Project. Bruce Stokes, director of global economic attitudes at the Pew Research Center, will discuss trends in European public views in the wake of the euro crisis based on Pew s annual survey of European countries. 5
Session II 13:30-14:30 Keynote How to cope with target imbalances Hans-Werner Sinn In recent years, the target balances of the euro countries, which represent public international credit drawn from the Eurosystem, have risen to unprecedented levels. The lecture will present their origins and alternative ways of coping with them while trying to draw lessons from alternative currency systems. Hans-Werner Sinn obtained a doctorate (1978) and his habilitation (1983) from the University of Mannheim. He was appointed professor of economics and public finance at the Ludwig Maximilian University of Munich (1984) and president of the ifo Institute in Munich (1999), retaining both titles until his retirement (2016). He founded and governed the Center for Economic Studies and the international CESifo Research Network. 6
Panel I 14:30-16:00 What can we learn from history? the Latin Monetary Union Luca Einaudi is an economist and a historian. He holds a PhD in economic history from the University of Cambridge, is a research associate of the Centre for History and Economics, Cambridge, and was a visiting professor at the Institut de Sciences Politiques in Paris and a visiting fellow at the University of Princeton and at Harvard University. He is currently a general director in the Department for Economic Policy and Planning of the Italian Prime Minister s Office. He was an economic advisor to Prime Minister Romano Prodi in 1998, a member of the Cabinet of the Minister for the Governmental Programme in 2006 2008 and a senior economist in the Italian G8/G20 office in 2008 2009. The Latin Monetary Union (LMU 1865 1926) was formed between France, Italy, Belgium, Switzerland, and Greece, initially with the view to facilitate trade. However, during its first five years of existence, the LMU acquired a more ambitious geopolitical role, with an attempted expansion throughout Europe. The defeat of France in the Franco-Prussian War of 1870 and the slow movement from its bimetallist base (gold and silver on an equal footing with a monetary base) toward a growing international gold standard stalled the LMU s expansion. The management of the LMU proved that the initial agreement was very incomplete. Continuous negotiations and adaptation of rules were necessary to maintain the monetary union, backed by the threat of the cost of dissolution for weaker members but also through forms of flexibility that allowed the weakest states to suspend or limit the extent of their participation in the LMU until their financial situations improved. In the end, the LMU proved long-lasting but with a declining role before ultimately succumbing to the shock of WWI and to the divergent national policies implemented for postwar monetary stabilization. 7
Panel I 14:30-16:00 What can we learn from history? how the aftermath of a Eurozone breakup could look like if history is any guide Albrecht Ritschl, born in Munich, Germany, in 1959, is a professor of economic history at the London School of Economics and a fellow at the Centre for Economic and Policy Research (CEPR). He was previously a professor of economics at Humboldt University of Berlin, at the University of Zurich, and an associate professor of economics at Universitat Pompeu Fabra. He has published extensively on German economic history in the 20th century, with a focus on the Great Depression and the 1930s. He received wide press coverage for his warnings against an overly strict approach toward the Greek debt problem. Ritschl has been directing a major collaborative research project on the history of Germany s economic ministries since 1918, and is currently the lead researcher in a similar project on the history of the Reichsbank and the Bundesbank. Fault lines appear across currency areas and currency unions some time before they disintegrate. The aftermath is strong and appears to be regionally clustered. This short panel presentation will look into historical evidence on the gold standard and its eventual breakdown, as well as further evidence on currency union breakups. None of the evidence examined bodes very well for the immediate aftermath of a Eurozone breakup. Historical evidence on the medium-term consequences is mixed. 8
and what if it not? Panel I 14:30-16:00 What can we learn from history? the Argentinian disaster/experience Jeromin Zettelmeyer is a senior fellow of the Peterson Institute for International Economics, a research fellow at the Centre for Economic and Policy Research, and a member of CESifo. From 2014 until September of 2016, he served as director general for economic policy at the German Federal Ministry for Economic Affairs and Energy. Previously, he was the director of research and deputy chief economist at the European Bank for Reconstruction and Development (2008 2014), and before that a staff member of the IMF (1994 2008). His research interests include financial crises, sovereign debt, and economic growth. What are the parallels between Argentina s 1999 2002 recession, devaluation and default, and the 2009 2012 euro crisis, as experienced by Greece, in particular? What lessons, if any, can we learn from this comparison about (1) the sustainability of the euro, (2) the management of any future euro crises? The presentation will answer these questions by comparing causes, crisis management, and outcomes of the two crises. Moderator: Philip Plickert, born in 1979, has studied economics and economic history at the University of Munich and graduated from the London School of Economics. In 2007 he earned a PhD from the University of Tübingen. In the same year, he started working as an economics editor of Frankfurter Allgemeine Zeitung (FAZ), where he covers macroeconomics, monetary policy, economic science, and other topics. In addition, he has been a lecturer at Goethe-University Frankfurt and at the University of Siegen. 9
Panel II 16:30-18:00 Thinking about the unthinkable [Art 50] ways to leave the euro does the Eurozone need an exit clause? Clemens Fuest obtained his doctorate in economics from the University of Cologne (1994). He was a professor at the University of Cologne (2001 2008), the University of Oxford (2008 2013), and the University of Mannheim (2013 2016), where he also served as president of the Centre for European Economic Research. He is now president of the ifo Institute in Munich, director of the Center for Economic Studies, and a professor at the Ludwig Maximilian University of Munich (since 2016). This presentation discusses the pros and cons of introducing an exit clause as an element of the reform of the Eurozone. Currently the only established procedure for EU member states to leave the euro is via the Art 50 TEU procedure. Exit clauses have the advantages of reducing the cost of exit if it occurs, and protect individual countries against exploitation. The disadvantage is that they may increase the likelihood of inefficient exit. Exit from currency unions may lead to runs and therefore require a design which differs from the design of other exit clauses. Moderator: 10 Ursula Weidenfeld received her doctorate from the University of Bonn. She works as an economics journalist and columnist in Berlin and Potsdam. Prior to this, she worked as editor in chief with Impulse, deputy editor in chief (Der Tagesspiegel), companies editor (Financial Times Deutschland), and correspondent (Wirtschaftswoche). She studied economic history, economics, and German literature in Bonn and Munich. She has a regular column with Tagesspiegel and T-online. She also writes books on current economic and political issues: Gelduntergang. Wie Banken und Politik unsere Zukunft verspielen (München 2012, co-authored with Michael Sauga); Regierung ohne Volk, Warum unser politisches System nicht mehr funktioniert (Berlin 2017).
Panel II 16:30-18:00 Thinking about the unthinkable how and why did Greece stay in the emu? Costas Lapavitsas is a professor of economics at the School of Oriental and African Studies, University of London. His research during the last few years has focused on the Eurozone and on the financialization of capitalism. He has published widely in the academic field and writes frequently for the international and the Greek press. In January 2015, he was elected to the Greek Parliament with the incoming SYRIZA party, but left in August 2015 when the third bailout of Greece was signed. His most recent books include Against the Troika: Crisis and Austerity in the Eurozone (Verso 2015, co-authored with H. Flassbeck); Profiting Without Producing (Verso 2013). An EMU exit will remain on the agenda for several countries in the foreseeable future. This presentation will examine the feasibility of an exit by considering its likely impact on the assets and liabilities of the main economic sectors of the economy. A method of calculating this stock effect will be proposed and applied to Greece. The presentation will also consider some of the legal aspects of an exit, including those referring to TARGET2. 11
and what if it not?
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