Guest lecture KU Leuven in course: The Economics of European Integration – Prof. Abraham

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The social dimension of European economic and monetary integration Puzzles paradoxes perspectives Frank Vandenbroucke Guest lecture in: Economics Integration – Prof Abraham 20 December 2017 the project according to founding fathers: a belief in convergence • would support simultaneous pursuit progress cohesion both within countries (through gradual development welfare states) between upward across Union) Initial division labour: development: supranational policy coordination security rights & anti-discrimination: national sovereignty (in theory) machine worked… more or less… until 2004/2008 US 1 4 EU27 3 2 0 9 8 7 6 5 Median income states (US ‘representative state’ = 1) EU Member States (EU MS’ Romania Denmark Top quintile 32% 133% 30% 140% 28% 145% 23% 152% A tragic dilemma enlarged heterogeneous EU)? Minimum wages what governments can do: net disposable couple with children one minimum-wage earner 45000 40000 35000 30000 25000 20000 15000 10000 5000 LU IE AT FI UK DE FR NL DK BE IT SI EL CZ ES SK EE PL HU LT PT LV RO BG Net Gross wage Source: CSB/MIPI 2004-06 2012 60 50 40 30 10 Very high work intensity High Medium Low low Work household Bron: Eurostat SILC 2005-2007; 2013 Reconciling openness domestic Access benefits: general principle non- discrimination exception: posting workers Transparency coverage minimum regimes Division Design flaws De Grauwe Flexibility determines order Institutional advantage coordinated bargaining Macro-economic stabilisation: smoothing shocks: vs EMU 80% 70% 60% 50% 40% 20% 10% US: – federal tax-and-benefit system state-based unemployment insurance framework extensions Saving taxes transfers Factor capital depreciation Total smoothed 0% -10% 1979-1998 1999-2010 Furceri Zdzienicka Euro Area Crisis… IMF Working Paper Why are stabilization instruments centralized unions? Risk sharing (pooling) Externalities public good (vaccination) Vaccination: compulsory (minimum requirements) subsidized (re-insurance) requirements for an effective stabilisation capacity: sufficiently generous benefits notably short-term; sufficient rates benefit schemes; no labour market segmentation that leaves part force poorly insured; proliferation employment relations not integrated into insurance; activation unemployed individuals; budgetary buffers times so automatic stabilisers do their bad These principles become fortiori imperative if Eurozone be equipped re-insurance systems: institutional moral hazard shared conception flexibility Labour institutions deliver on (effective collective bargaining) Cluster adequate capacity MS: insured against unemployment; systems individuals  Convergence some key features Pillar Social Rights Gothenburg Summit 17 November Union systemic level functions (e g fair corporate taxation …) guide substantive via standards objectives leaving ways means basis operational definition ‘the model’ cooperate union explicit purpose pursuing pan-European based reciprocity Zdziencicka Crisis: Need Supranational Fiscal Sharing Mechanism ? 13/198 Reduction Moral Hazard: Vaccination Metaphor Intereconomics Vol 52 May/June Number pp 154-159 From Europe 27 https://www socialeurope eu/gothenburg-social-summit-european-social-union Barnard Baere (eds ) after Crisis Cambridge: Cambridge University Press September https://doi org/10 1017/9781108235174 Introductory chapter Open www frankvandenbroucke uva nl item 263 Structural versus competition: limits diversity policies Economic Monetary ECFIN discussion paper 065 Commission Directorate-General Financial Affairs Brussels July http://ssrn com/abstract=3008621 All publications: