Challenges for the euro area [What Think Tanks are thinking]

In June 2018, the Heads of State or Government of the countries sharing the euro currency would discuss ways to improve the functioning of the euro area. French President Emmanuel Macron had proposed an ambitious reform plan, but Germany, the euro area’s economic powerhouse, was more cautious.

Despite continued growth, after years of stagnation, the euro area needed better governance to meet future challenges, economic analysts said. They added that recent political developments in Italy might complicate the drive for reform, as could unstable political situations elsewhere such as Spain.

The discussion on how to deepen and improve the functioning of Economic and Monetary Union (EMU) continued in 2018 on several fronts. Issues under discussion included euro-area governance, the role of the European Central Bank (ECB), the fiscal rules, debt-mutualisation, risk-sharing, and the nature of, and political compromises between, French and German perspectives within the system.

The dispute between Italy and the European Commission over the former’s budget for 2019 was now a major topic for discussion at Eurogroup meetings, as were Banking Union and the sustainability of economic growth, notably in light of the expected tapering of the ECB’s bond-purchase programme.

In a separate development, European Commission President Jean-Claude Juncker had proposed increasing the international role of the euro, which some analysts said could replace the US dollar in certain international transactions, given the volatility of US economic policies.

This note brought together commentaries, analyses and studies by major international think tanks and research institutes on challenges facing the euro area and related issues.

Earlier publications on the topic can be found in previous editions of 'What Think Tanks are Thinking' published in

+ June 2018
+ December 2017
+ July 2017

Background information

The European Commission published on 6 December 2017 a Roadmap for deepening the Economic and Monetary Union, containing a package of communications and legislative proposals to achieve the objective.