Eurozone governance - squaring the trilemma

23  September 2015    5:00 pm CEST

Christian Odendahl, chief economist at the Centre for European Reform (CER)


wiiw, Rahlgasse 3, 1060 Vienna, Library (2nd floor)


The euro crisis has revealed major shortcomings in the architecture of the eurozone. At the same time, citizens in Europe want to be governed by national democracies. Can the euro work with national democracies? This paper argues that in order to make the euro viable, economically and politically, policy-makers need to start from the assumption that all policies should be in the hands of national democracies, and only integrate those areas in which a common response is crucial for the survival of the eurozone. Such an approach would focus on banks and capital markets; the lender-of-last-resort function of the ECB to both banks and sovereigns; monetary policy and overall demand; and finding national, central-bank-like mechanisms to enforce strongly counter-cyclical regulatory and fiscal policies. A European approach to structural reforms, however, would play a minor role at best. 

Christian Odendahl is chief economist at the Centre for European Reform (CER) in London, where he works on the eurozone, its institutions and political economy; monetary and fiscal policy; as well as German politics and economics. Before joining the CER, he worked as a senior economist at Roubini Global Economics. Until 2012, he was a regular contributor to The Economist’s Free Exchange blog and has also worked on the editorial team of The Economist as a Marjorie Deane financial journalism fellow. Christian holds a PhD in economics from Stockholm University.