Welcome to Scribd, the world's digital library. Read, publish, and share books and documents. See more
Download
Standard view
Full view
of .
Save to My Library
Look up keyword
Like this
9Activity
0 of .
Results for:
No results containing your search query
P. 1
U B S - Global Economic Perspectives 17/11/11

U B S - Global Economic Perspectives 17/11/11

Ratings: (0)|Views: 763 |Likes:
Published by John Papadakos

More info:

Published by: John Papadakos on Nov 17, 2011
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as PDF or read online from Scribd
See more
See less

11/14/2012

 
 
UBS Investment Research
 
Global Economic Perspectives
European end game – what kind of fiscalintegration
 
The Euro should not exist (like this)
Under the current structure and with the current membership, the Euro does notwork. Either the current structure will have to change, or the current membershipwill have to change.
 
What has been done already?
We base this piece on what has been decided already and the measures that havebeen taken towards fiscal integration, a number of which have been under the radarscreen of most investors. Namely, we look at the “European semester”, the EFSFand ESM. We identify a number of common features.
 
What kind of fiscal integration?
Our view is that “fiscal integration” will mean a transfer of competency from localStates to the EU (probably the Council). The EU will become more intrusive beingable to monitor budgets properly and will have pre-emptive mechanisms to identifyimbalances. The EU will also have at his disposalenforcement mechanism in casethe targets are not met. Fiscal policy will remain the task of local government, butthe room for manoeuvre will be more strictly limited.
 
How to get there?
Several options are available, and we review the three main ones. Option 1 is atreaty change, a very cumbersome approach. Option 2 is a treaty change but for alimited number of countries. This is the resurrection of the “monetarist Schengen”idea from the mid-1990s. Option 3 is to increase the power of the Commission orcouncil with the creation of a monitoring arm.
Global Economics Research
Global
 
London
 
17 November 2011
 
www.ubs.com/economics
 
Economiststephane.deo@ubs.com+44-20-7568 8924
Economistpaul.donovan@ubs.com+44-20-7568 3372
Economistlarry.hatheway@ubs.com+44-20-7568 4053
Associate Analystmatteo.cominetta@ubs.com+44-20-7567 4652
 
This report has been prepared by UBS Limited ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 14.
ab 
 
 
Global Economic Perspectives
17 November 2011UBS
2
 
Index
Index 2
 
European end game what kind of fiscal integration 3
 
 
What has been done? Three case study..............................................................4
 
 
The “European semester”..............................................................................4
 
 
The EFSF version 2.0....................................................................................5
 
 
The ESM........................................................................................................6
 
 
What direction is taken? What we learn from existing initiatives...........................9
 
 
A pre-emptive approach.................................................................................9
 
 
More enforcement mechanism.......................................................................9
 
 
Lastly, a plan to address extreme events is clearly needed..........................10
 
 
How to get there? The remaining steps and the likely procedure to get there.....11
 
 
Option 1, a change in the treaty...................................................................11
 
 
Option 2, a “monetarist Schengen”...............................................................11
 
 
Option 3, a European Minister of Finance (or tsar, or equivalent).................12
 
 
A two speed Europe?.........................................................................................13
 
 
Past publications, the “The Euro should not exist (like this)” series.....................14
 
 
 
Global Economic Perspectives
17 November 2011UBS
3
 
European end game – what kindof fiscal integration
Our long standing view, expressed for instance in May last year (see “Fiscalintegration” May-28 2010) is that the end game of the European crisis will besome form of fiscal integration. Our view is that a breakup is not an option, sothe only feasible path was more fiscal rules, which would be a step towardsfiscal integration. As Sharon Bowles said “When you eliminate the impossible,you are left with the improbable”. We have been however always very carefulon the way we phrase it as indeed “fiscal integration” can mean a vast range of concepts. This paper tries to put more flesh around the idea, first because thedebate on that aspect is indeed moving. Second, and more importantly, becausea number of steps have been taken on the direction of fiscal integration. We thusnow have a much better idea on how the end game will look like and what formof fiscal integration we will see.Our view is that “fiscal integration” will mean a transfer of competency fromlocal States to the EU (probably the Council). The EU will become moreintrusive being able to monitor budgets properly and will have pre-emptivemechanisms to identify imbalances. The EU will also have at its disposalenforcement mechanism in case the targets are not met. Fiscal policy willremain the task of local government, but the room for manoeuvre will be morestrictly limited.This is a limited form of fiscal integration, arguably an embryonic one. Whetherthis will provide a stable outcome or one that has to be broadened remains to beseen. One topic vastly discussed is fiscal transfers. De facto the EU budget ismainly (if not exclusively) fiscal transfers, on the form of agricultural subsidies,structural funds etc… Every monetary union in history has indeed eventuallyhad to implement to some degree. Talks are mounting about re-orienting the EUbudget towards this direction, but these are very preliminary. The discussion wehave below is thus about yet another step in the integration of Europe, we call it“end game” in the context of this crisis, but surely many more “end games” willfollow.This article is organized in three steps. First we look at what has been donealready in terms of governance enhancement. We are indeed surprised thatinitiatives like the “European semester” has not received due attention fromcommentators. In the second part, we derive from those case studies of previousdecisions, the common features and the likely direction Europe is heading to.Finally we look at the implementation of the measures and the legal process.

Activity (9)

You've already reviewed this. Edit your review.
1 thousand reads
1 hundred reads
xstrauss liked this
pontany liked this
benji3456 liked this
alexdgon liked this
maxwelton9938 liked this

You're Reading a Free Preview

Download
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->