Ideas Monitor #27/2017

From the G20 to the question of European leadership, and the chances of a New Deal in the XXI century

Last week’s Hamburg G20 meeting has been at the centre of Europe’s recent public intellectual debate. On Carnegie Europe, Judy Dempsey argues that the meeting highlighted the current gap between the United States and the European Union. According to Dempsey, although the US has always “swung between multilateralism and unilateralism”, the Trump administration is now leading a constant attack against the institutions that have preserved the world order as we know it since 1945. More importantly, focusing on Europe, Dempsey calls for Angela Merkel and Emmanuel Macron to outline a vision for the Union’s place on the world stage.

A vision that, however, currently seems lacking in Europe, according to Ernest Gallo and Giovanni Biava. Writing on openDemocracy, the Gallo and Biava argue that European democracies have lacked high profile political leadership since the 1980s. Comparing Macron to former German Chancellor Helmut Kohl, the authors wonder whether the former will be able to rise to history as a “statesman or as a pale hologram”. Gallo and Biava also argue that European democracies need “the nobility of the generation of politicians who witnessed World War II and its aftermath”.

Nevertheless, on Iris, Rémi Boureot writes that “Euphoria and Macon-mania are of little help in times of hard choices”. More specifically, the French intellectual argues that expectations about what the leadership of Merkel and Macron can achieve are dangerously high. Notwithstanding the impressive start of Macron’s Presidency in Europe, one has to take into account the scepticism among German élites with respect to the reform proposals of the French Government, the author argues.

Moreover, the recent rescue of two Italian banks, Banca Popolare di Vicenza and Veneto Banca, highlights that in the face of short term political pressures, long term European arrangements can easily be broken. Writing on Bruegel, Dirk Schoenmaker suggests that European policy-makers need to develop a macro-approach if they want to develop a solid banking resolution policy. More precisely, Schoenmaker calls for the European Stability Mechanism (ESM) to become the main fiscal backstop of the European Banking Union. In other words, the ESM should be able to recapitalise the banking system in the case of a new major financial crisis.

Speaking of monetary policies of central banks instead, on Project Syndicate Nouriel Roubini discusses the prospects of an end of so called “unconventional” monetary policies. Although market actors seem to worry about a similar scenario, Roubini argues that there is no reason to panic. Indeed, according to the renowned economist, global economics have entered a new historical phase marked by “abnormal policies”. As a result it seems just impossible, at the moment, to move away from low interest rate policies.

One could say that abnormal times call for courageous policies. On the The New York Times, Yanis Varoufakis argues that the self-reinforcing dichotomy of “globalism” and “isolationism” needs to be broken by a XXI-century “New Deal” that enabling investments across the Western world. The former Greek Minister of Finance calls for global savings to be mobilised in order to foster investments in jobs, health and education, both in the US and in the EU.

This Ideas Monitor is by Carlo Burelli and Alexander Damiano Ricci

Photo Credits CC Presidential Press and Information Office

Also published on Medium.