“EU-level control has increased, and the financial and budget autonomy of the member states has decreased. This has been the case particularly in countries that have received financial support, but also in the Eurozone countries that have provided support,” says Kaarlo Tuori.
How did we get here?
An economic boom was underway. It was believed that the enacted monetary policies had been effective in controlling fluctuations in the economy.
In reality, it was only a protracted upswing, which was further strengthened by the inflation-focused monetary policy. The negative effects of long-term economic trends in the Eurozone intensified before the crisis and even during it.
The assumption that continued and balanced economic development toward a well-functioning single currency was possible proved utopian.
The researchers think that the lax membership criteria of the Economic and Monetary Union (EMU) are partly to blame.
“The member states differ significantly as to their economic structure and ability to function within the EMU framework, but this wasn’t sufficiently considered in the membership criteria,” Klaus Tuori notes.
Necessity knows no law
The leaders of the Eurozone countries have since attempted to correct this mistake by increasing control at the EU level. One of the most important changes relates to the “no-bail-out clause” which stipulates that a country cannot assume another country’s debts.
The Maastricht Treaty, signed in 1992, gave the member states autonomy over their financial and budget policies, but the union and the other EU member states were forbidden from assuming the debts of other members.
The crisis has led to the less stringent application of the no-bail-out clause. According to EU Commissioner Olli Rehn, this was inevitable.
”The Maastricht Treaty was based on the ridiculous idea that economic crises would never occur. There were no means to take care of a crisis. Out of all bad options, this was the best option available,” says Rehn.
A relaxed application of the founding principles has been especially clear in the case of the European Central Bank.
“The European Central Bank has played or been forced to play a greater role than would befit an independent expert organisation,” Klaus Tuori points out.
The seminar marking the release of the book by Kaarlo Tuori and Klaus Tuori was also attended by Professor Sixten Korkman and Niilo Jääskinen, Advocate General at the European Court of Justice.