Article Published May 2nd, 2018
PRESS RELEASE 02/05/2018
Federal Trust proposals for Eurozone Stabilisation Fund
A new paper (Eurozone Stabilisation Fund Revisited), published by the Federal Trust think tank, discusses flaws in the design of the euro area and proposes a remedy via a Eurozone Stabilisation Fund ahead of June’s EU summit.
Since its inception, Eurozone countries have indeed experienced booms, busts and slow recoveries, partly due to asymmetric shocks which the common interest rate cannot cater for. Moreover, Eurozone countries have also been slow to implement structural reforms, resulting in sluggish growth. Regrettably, the Eurozone is not delivering sustained growth for its citizens and recovery has been variable since the global financial crisis. The flaws in the Eurozone design must be addressed to achieve wider and deeper prosperity.
In this report, author Mark Nevin articulates how this inherent instability can be fixed by proposing a Eurozone Stabilisation Fund (EZSF) that insures against asymmetric economic shocks. The paper proposes payments into and from a Eurozone budget would be based on national economic performance relative to each country’s potential growth rate.
Under the EZSF, countries growing at or above their potential would contribute 1% of their GDP to a fund. That money which would be dispersed to other countries growing significantly below their potential via a supplementary national budget tailored to their circumstances.
Nevin said “other proposals for a Eurozone budget are scant on detail or have major economic, political or governance shortcomings. The EZSF model serves a dual purpose: incentivising growth-enhancing reforms across the Eurozone; and providing targeted financial assistance where it is most needed. Unlike some proposals for Eurozone reform, it is emphatically not a free ride for irresponsible governments.”
Brendan Donnelly, Director of the Federal Trust said, “This paper is a timely contribution to deliberations on Eurozone reform. It explores key economic, political and governance considerations, explains why a Eurozone budget is needed and how it can be done.”
Nevin added “The improved economic climate in Europe should not lead to complacency. This reform is overdue and in fact essential for the Eurozone to grow and prosper in the years to come. Eurozone leaders must use the forthcoming European Council to begin the process of real reform.”
For questions or further details, please ring Brendan Donnelly on 07956 379129.
Notes for editors:
- The paper is published by The Federal Trust for Education & Research, 84 Moorgate, London EC2M 6SQ, T: 020 7320 1677. www.fedtrust.co.uk
- Mark Nevin studied economics and European politics at Birmingham University and the LSE. His areas of expertise are political economy, government reform, health policy and digital health. An optometrist by training, Mark’s day job is Senior Executive Officer, Faculties, Strategy and Advocacy at the Royal Australian and New Zealand College of Radiologists in Sydney.
- The paper is available online and in pdf format on the Federal Trust website:
Eurozone Stabilisation Fund: Revisited
If you wish to receive a printed copy please contact Ulrike Rueb-Taylor on [email protected]