Reality Check for European Integration

14 December 2018

Economists and political scientists at an event in Vienna jointly organised by wiiw expressed serious concern about the future of the EU project.

  • Measures so far put in place to insulate the eurozone from the next crisis have been insufficient according to many economists. 
  • Moreover, hardening political fault lines mean that the chances of significant reform to insulate the single currency area from future shocks are even lower than before. 
  • While Brexit has proven so far to be a powerful unifying force for the other 27 member states, broader EU integration also looks highly challenging in the current political context. 
  • These are the main conclusions of a high-level meeting of major European think tanks organised by the Vienna Institute for International Economic Studies (wiiw) and the Austrian Society for European Politics (ÖGfE) on December 10th.

Researchers, policymakers and think tanks have put forward countless proposals for reform of the EU and the eurozone in the last few years. However, this has resulted in few significant steps towards greater integration, and the reform debate is now beset by widespread disappointment. A decade on from the global financial crisis and the ensuing eurozone crisis, much of the EU is facing increased political turmoil. 

In this context, and with the Austrian EU presidency drawing to a close, wiiw and ÖGfE invited eight prominent European economists and political scientists to Vienna on December 10th, to discuss together concrete steps for European integration [1]. Emphasis was placed on identifying measures that in the current political context could have a chance of succeeding. While recognising the difficulties involved, László Andor noted that little progress had been made on European integration during the Austrian presidency, and that in some cases the process had even gone backwards. Gregory Claeys remarked that greater reform and integration faces two main obstacles: political factors (such as the opposing positions of Italy and Germany) and more long-standing “red lines” (such as “no permanent transfers” and strict conditionality for assistance to countries that run into trouble). Karl Pichelmann suggested that a window of opportunity to achieve greater reforms—the robust economic upswing of 2016-17 and the election of Emmanuel Macron—could have been missed. 

Experts gathered in Vienna generally agreed that a new crisis will hit the EU or the eurozone at some point, and some felt that recent developments in Italy suggest that it is already here. A major crisis could force a new great leap forward in EU integration, but this is a high risk strategy. Experts noted that the next crisis does not have to come from financial markets, although this was viewed as one likely trigger. Some expressed concern about this, although Daniel Gros felt that the financial markets actually provide a useful role in keeping member states in line (this was disputed in particular by Karl Pichelmann). Loukas Tsoukalis viewed a new migration crisis as the biggest threat to the European project. 

Sonja Puntscher-Riekmann felt that political capital has been significantly drawn down over the past decade, and that as a result it will be much more difficult to take decisive action at the EU level when the next crisis hits. The EU was institutionally and intellectually unprepared for the global financial and eurozone crises, and whole political parties have been effectively wiped out by it. Some participants argued that we have reached the limit of all EU integration. A North-South divide is set in the eurozone, most clearly in the shape of the “New Hanseatic League”. In this context, Loukas Tsoukalis argued in favour of the possibility of further integration only being carried out by a “core” of like-minded states. One theme also emphasised by several speakers was widespread discontent with politics in many EU member states. Stefan Lehne pointed to the EU’s legitimacy deficit, and the need to reengage citizens in the debate on the future of the EU in order to achieve sustainable reform (which may be possible in the context of the upcoming European Parliament elections). Christian Odendahl suggested areas where European integration could still take steps forwards, including a better targeting of regional policy to help poorer parts of the bloc, and moves towards a common tax base (including an end to the exploitation of the system currently by some countries). 

Several participants identified the following dilemma at the heart of debates over eurozone reform: on the one hand, the single currency area remains vulnerable to future crises without further integration, especially in terms of fiscal policy and finance. A joint budget that can be used by member states running into difficulties, a common deposit insurance scheme to help break the “doom loop” between weak banks and sovereigns, and some kind of debt mutualisation are among the proposals that have been put forward to address this. However, on the other hand, it is clear that opposition in many creditor states, not limited to Germany, is very high. Solving this dilemma is key to putting the eurozone on a more sustainable footing and helping to ensure its long-term survival. 

Following the event, Michael Landesmann, wiiw Senior Research Associate and former Scientific Director of wiiw said ‘The past 10 years since the beginning of the financial and economic crisis had a deep impact on the socio-economic fabric of many European countries, causing significant political shifts within countries and tensions in inter-country relations. The underlying deep causes of these social and political cleavages have to be understood and tackled at national and European levels to not only allow the European integration project to survive, but to regain support for its recovery.’

A video-stream of the panel discussion is available on facebook: 

Panel 1: EU / EMU Reforms: What is politically feasible and when?

Panel 2: European Integration: Progress/Regress in which areas and why?


Michael Landesmann, wiiw Senior Research Associate; former Scientific Director (, +43-1-533 66 10)

Veronika Janyrova, wiiw press contact (, +43-1-533 66 10-53)

[1]The eight participants were László Andor (Corvinus University Budapest), Grégory Claeys (Bruegel), Daniel Gros (CEPS), Karl Pichelmann (European Commission), Stefan Lehne (Carnegie Europe), Loukas Tsoukalis (ELIAMEP), Sonja Puntscher-Riekmann (SCEUS), and Christian Odendahl (CER).