Jean Monnet Chair seminar: Sonja Puntscher Riekmann

While the post-2008 financial and fiscal crisis made the integration failure in EMU manifest, the ensuing rescue mechanisms deeply impinge upon the political economy and representative democracy of member states. The asymmetry of centralized monetary policy and decentralized economic, fiscal and social policy can no longer be ignored.
However, the strengthening of surveillance and punishment to avert moral hazard of national governments has problematic and paradoxical consequences: first, it creates a new asymmetry between creditor and debtor states; second, it erodes the traditional political economy and the social fabric of debtor states ; and thus third, as government change through elections hardly leads to policy change, the moral hazard approach rather fosters the emergence of left or right protest parties than abidance with strict rules. At the same time political debates about how to construct a genuine European fiscal federalism balancing hardship with transfers as advocated by many economists, let alone about how to guarantee its democratic legitimacy do not seem to be on the European agenda.