Conclusion How to (Re-)Envision Eurozone Governance

After briefly setting the Eurozone crisis in international context, this Conclusion asks how the EU may move forward, to re-envision Eurozone governance while resolving the EU’s (euro) crisis of legitimacy in ways that ensure greater input, output, and throughput legitimacy. To do so, it recommends reforming Eurozone governance through a more fine-tuned approach to EU-level macroeconomic coordination via more differentiated country-specific targets debated by EU actors. And it proposes decentralizing the administration of the European Semester to ensure a more bottom-up process that is more sensitive to national varieties of capitalism and growth models. Only in so doing, the chapter argues, can there be greater democratic input at both EU and national levels, which could serve to reduce the citizen discontent driving populism. But for this to work, more solidarity mechanisms along with more resources are required not just for the Eurozone but equally across crisis areas, to ensure successful output performance. Finally, the chapter suggests that EU governance itself requires rethinking through more differentiated integration. Rather than a “hard core” moving forward, or Europe “à la carte,” the most effective future integration would be by seeing recognizing the EU as it already is: a “soft core” Europe of clusters of member states in overlapping policy communities, administered by one overall set of institutions.

The Problem in Detail

This chapter sets the stage for the empirical investigation of the domestic political economic sources of international conflicts and cooperation. It consists of four parts. First, it gives a general brief historical overview over the problems of the international regulation of finance since nineteenth-century imperialism until the global financial crisis that started in 2008. Second, it introduces the G20 as the main forum for global economic cooperation. Third, it offers an overview of the different reactions to the global economic crisis since 2008. Fourth, it introduces the major conflicts in the G20 about the international regulation of finance in the three crucial areas identified in Chapter 1: global imbalances and macroeconomic coordination, financial globalization and financial regulation, as well as currency competition and management.

Monetary Power Reconsidered: The Struggle between the Bundesbank and the Fed over Monetary Leadership

This article reexamines the theory of monetary power to explain the role of the Bundesbank (and Germany) in the emergence of the rules-based low-inflation regime in the late1980s and early 1990s. Our theory of monetary power draws on the notion of institutional power and the concept of monetary leadership, understood as the capacity to attract foreign investment, and thereby explains how domestic institutional features and contingent historical events affect countries’ external monetary power. This theory is employed to trace how the Bundesbank go-it-alone strategy in 1989 triggered a cross-national sequence of events that changed the international monetary order in a way that was consistent with the German interests. The transition was marked by a shift from the US-led pragmatist approach of international macroeconomic coordination to a rules-based approach founded on the principle of low-inflation–targeting. The article argues that this change took place despite the opposition of the Federal Reserve System (Fed) and the US Treasury. The article contributes to the literature on the decline of US hegemonic power as well as the literature on the mechanism of institutional change at the international level. It also sheds new light on current debates about the putative decline of the rules-based world order.

Macroeconomic Coordination in the Eurasian Economic Union: Strategic Aspects

Coordinated macroeconomic policy is a special element within the integration process in addition to the four freedoms usual for economic integration: free movement of goods, free movement of services, free movement of labor, and free movement of capital. Macroeconomic coordination was, from the very beginning, a key idea behind each stage of the process of Eurasian economic integration. The politico-ideological foundation of the Eurasian idea is the facilitation of growth for Eurasian countries on the basis of economic pragmatism. The macroeconomic coordination process within the Eurasian Economic Union is based on the coordination of strategic planning systems in each Member State. Strategic planning plays an important role in macroeconomic coordination. Strategic planning documents have a sound legal basis in the Treaty establishing the Eurasian Economic Union. At the same time Eurasian integration provides a platform for best practice exchanges and coordination of strategic planning between the Member States.

Exclusive Club Under Stress

This chapter traces how the seemingly united front against the G7 by rising powers and civil society actors broke apart in the early 2010s. While rising power criticism of the G7 waned after the first G20 summits, civil society organizations (CSOs) maintained their critical stance and extended it to the G20. The chapter argues that, from the beginning, contestation by the two sets of actors had focused on different issues. Opposition by rising powers was driven mainly by their own exclusion from the governance club. In contrast, many civil society actors rejected not only the exclusiveness of the G7 on a much more fundamental level but also the idea of liberal macroeconomic coordination as such (policy content). To demonstrate this, the chapter develops a framework for analysis, based on the introductory chapter to this volume. It, then, describes the G7 and its post-Cold War development and analyses the key institutional bones of contention for the BRICS states and for important non-state actors. The analysis shows that rising power governments always had been much closer to business actors and G7 members than to CSOs in their vision for macroeconomic governance. The upgrading of the G20 brought the divergence of positions between the BRICS and CSOs clearly to light as it satisfied the BRICS’ desire for inclusion and left CSOs alone with their more fundamental critique of liberal governance through small groups of powerful states.

2011 Triennial Surveillance Review - External Commentary - A Short Note on Surveillance and How Reforms in Surveillance Can Help the IMF to Promote Global Financial Stability

Commentary prepared by Joseph E. Stiglitz, University Professor, Columbia University: Surveillance has widely been viewed as a key instrument by which the IMF ensures member states adhere to the kinds of policies which promote global economic stability and through which the global macroeconomic coordination necessary for economic stability is achieved. Indeed, as Ocampo (2011) notes, "...the first objective of this institution is to provide 'the machinery for consultation and collaboration on international monetary problems.'" But there is also widespread agreement that there are major shortfalls in the achievement of these lofty objectives. Part of the problem has been in the view that countries—particularly those not borrowing from the fund—lack incentives to comply with the advice that would achieve such stability. Since those countries include virtually all of the systemically significant countries, if surveillance has an impact on global stability (as opposed to the well-being of particular countries) it is only the result of (i) a process of consensus building in which actions which they might previously have thought to not be in their interest were in fact in their national interest; or (ii) enough small countries, each of which is systemically insignificant, are affected in a meaningful enough way so as to have systemically significant effects.