The European Paradox

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The European paradox Frank Vandenbroucke University of Amsterdam Metaforum Lecture Leuven 27 3 2017 ¥ founding fathers: Ð market integration => upward convergence Integration & support domestic cohesion Initial division labour: economic development: supranational social national sovereignty (in theory) machine worked… more or less… until 2004/2008 A tragic dilemma integration? Design flaws in the project creating instability? Material deprivation: an absolute notion poverty Inability to afford items on a list 9; true pan-European benchmark 60 50 40 30 EU22 (unweighted average) 20 10 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 EU15 Core+North South EU7 Ireland UK Poland 25 15 EU7: CZ HU LV LT EE SI SK 5 Pan-European relative income is ‘American level’ but decreased EU15Core+North 2004 (excl RO BG MT CY) data: Goedemé e Centrum voor Sociaal Beleid What went wrong? 2004-06 Very high work intensity High Medium Low low Work household Bron: Eurostat SILC 2005-2007; Erosion welfare states? Changing composition households? More precarious jobs? Migration? Key issue: capacity governments fight societal trends towards inequality and stabilize systems 80% 70% 60% 50% 40% 30% 20% 10% US: – Federal tax-and-benefit system State-based unemployment insurance with federal framework extensions Saving Net taxes transfers Factor capital depreciation Total smoothed 0% -10% US EMU 1979-1998 1999-2010 Furceri Zdzienicka Euro Area Crisis… IMF Working Paper Stabilization instruments are always centralized monetary unions (risk sharing) Paradox: solidarity at state level weak they supported by mechanisms level; EU not ready strong member Puzzle of: Binding agreements sovereignty Distrust solidarity Legitimate concern about moral hazard which has become obsession Social Union would states systemic some their key functions (e g stabilization fair corporate taxation minimum wages) guide substantive development – via general standards objectives leaving ways means policy Member States basis operational definition ‘the model’ ⇒ countries cooperate union explicit purpose pursuing both based reciprocity Thank you 1) union: puzzles paradoxes perspectives Boone Marc; Deneckere Gita Tollebeek Jo (eds ) End Postwar Future Europe Essays Ian Buruma Verhandelingen van de KVAB Wetenschappen en Kunsten Nieuwe reeks 31 Uitgeverij Peeters Forthcoming 2) Trindade perspective low-income dynamics CSB 17/03 Antwerp: Herman Deleeck Centre for Policy (University Antwerp) 3) Union: Unduly Idealistic Inevitable? Debates 7 Investment Bank Institute September 4) Rinaldi inequalities challenge In: Vision Summit Consortium ): Redesigning Ways forward Gütersloh www frankvandenbroucke uva nl researchgate net