With the start of the euro in 1999 we entered a new phase of increased European integration. So far, the euro has survived, despite major political and economic shocks. In 1999, the prevailing idea was that every country in the euro area should solve its own problems without help from others. In my lecture, I will show this was an illusion. We only succeeded in overcoming these big shocks by creating ad hoc safety nets and support mechanisms.
What about the future? Europe faces new structural challenges in an increasingly hostile world. New big shocks will occur for sure, even when predicting where and when they will hit is impossible. To deal with these, we need more Europe, not less. The narrative should change from “it’s everyone for himself” to “all for one, and one for all”. As one example, I propose a structural risk-sharing mechanism. To dampen the impact of future shocks, allow for better monetary policy, and perhaps most importantly create a bigger sense of solidarity across European citizens.
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