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The time has come to open a lucid debate on the ways and means to make Europe better deliver democracy and sustainable growth. The Report on the State of the European Union examines the progress of European integration and focus on economic aspects of the process. This volume explores the themes of: democracy and legitimacy, convergence and cohesion, macroeconomic policies and social integration. the report is written in an accessible way and will be a useful resource for academics, students, policymakers, journalists, and government advisors.



Democracy and Legitimacy


1. Democratic Legitimacy and Political Representation in the EU Institutions

The integration of the European Union (EU) has been an ever-changing process of institutional reform. The summit agendas of the heads of state and governments are characterized by discussions and debates between member states on treaties, conventions, intergovernmental conferences and, more specifically, on Union rules, on changes in the modus operandi of the supranational bodies of Brussels and Strasbourg and on enlargements to include new members. Moreover, the planning of institutional change has to be carried out alongside the EU’s increasing day-to-day activity.
Jean-Paul Fitoussi, Fiorella Kostoris Padoa Schioppa

2. Overruled Europa: Market versus Democracy in the EU

On the eve of the introduction of the euro in 1999, Jean-Paul Fitoussi stated that he was deeply worried by the deafening silence surrounding the advent of the single currency: ‘the economic policies of the forthcoming years, namely the post-euro period, are presently being given shape. This may seem like stating the obvious, and yet the happening of such important events has aroused neither debate nor questioning’.1 He then added: ‘the focus ought to be on the choice of a model for our society, as this is the European peoples’ only real concern’.
Jean-Paul Fitoussi, Fiorella Kostoris Padoa Schioppa

Convergence and Cohesion


3. The Mirages of Nominal Illusion: Variations on Convergence

The euro, the European single currency, was launched in Europe on 1 January 1999, and the subsequent Economic and Monetary Union (EMU) now comprises virtually all European Union (EU) members, namely twelve countries out of fifteen; the United Kingdom, Denmark and Sweden chose to opt out. However successful, economic policy management has never produced a perfect solution to a certain number of fundamental issues. How can a single monetary policy be made compatible with specific economic backgrounds (economic cycles, inflation); independent and yet capped fiscal policies; distinct labour markets; and different economic and social patterns?
Jean-Paul Fitoussi, Fiorella Kostoris Padoa Schioppa

4. Regional Differentials and Policies for Territorial Cohesion in the European Union

Since the late 1980s development gaps between the European Union (EU) member states have been narrowing. In a relatively short period of time, important catching-up events have emerged, alongside ongoing wide income discrepancies between regions within the individual member states. In a period of growing European integration and increasing Community efforts to encourage cohesion, the persistence of significant regional differentials poses two questions.
Jean-Paul Fitoussi, Fiorella Kostoris Padoa Schioppa

Macroeconomic Policies


5. The Conduct of Macroeconomic Policies in the Euro Area

With the adoption of the euro, the formal and material macroeconomic ‘constitution’ of the countries in the European Monetary Union (EMU) has changed considerably. The two major instruments used to regulate the economic cycle — namely, monetary and fiscal policy — were distributed differently among the various economic policy authorities of the EMU, thus creating an unprecedented asymmetry of powers and competences. Indeed, monetary policy is centralized and is left to an independent Central Bank, while fiscal policy remains decentralized and under the responsibility of the national authorities of the member states, though it carries an overall set of common rules.
Jean-Paul Fitoussi, Fiorella Kostoris Padoa Schioppa

6. The European Policy Mix: Law and Order

The euro area triggered the launch of a yet-unheard-of economic policy architecture. Unlike a US-style monetary union, Europeans decided they did not need the federal financial clout that would allow them to carry out an effective redistribution policy between member states on a vast ‘European’ scale. With an upward limit of 1.4 per cent of European GDP, the Community’s budget does not allow — far from it, in fact — for far-reaching policies. Torn as it is between the Common Agricultural Policy (CAP) and structural funds, it finds it hard to make its mark on either agricultural revival or the realignment of poorer regions.
Jean-Paul Fitoussi, Fiorella Kostoris Padoa Schioppa

Social Integration


7. European Indicators for Social Cohesion: A Step Forward Along the Lisbon Path

This chapter will describe the state of the art of social cohesion policies in the European Union, by focusing attention on the efforts made to elaborate and identify the correct indicators to better understand the different national situations and compare them at Community level.
Jean-Paul Fitoussi, Fiorella Kostoris Padoa Schioppa

8. From Tax Competition to Social Race to the Bottom? European Models and the Challenge of Mobility

In all the fields in which the European Union (EU) feels anxious to make progress, the welfare state seems to be the most urgent cause for reform. As the issue runs deep into most European citizens’ everyday life, it is only natural that it should become the focal point of the EU’s anxieties and hopes, at a time when it is torn between the erosion of national sovereignty and its elusive replacement by that of a federal state.
Jean-Paul Fitoussi, Fiorella Kostoris Padoa Schioppa


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