The EU crisis and the need for reforms

Abstract

Disparities, imbalances, and tensions between EU members are not a new phenomenon or, solely due to the ongoing global financial and economic crisis; rather, they emerged already just after the third stage of EMU has been implemented. The first signs of imbalances could be observed in increasing current account imbalances of all EMU member countries and increasing trade imbalances in intra-EU trade. The recent crisis added imbalanced public deficits and unsustainable debt levels in some countries. The analysis of the problems will be based on the theory of voice and exit, applied to the institutional framework of the EU. It will be argued that the current EU framework is characterized by an imbalance of voting rights and inflexibilities. This conclusion will be applied to the discussion of recent reform proposals, like an EMF, a fiscal transfer system, or a more centralized economic policy.