Three proposals for revitalising the European Union

The result of the UK referendum on exiting the EU is only the most visible sign of the shortcomings and fragmentation of the Union’s political, institutional and policy frameworks and of the need to reform them. In the economic field, the process of harmonisation of rules directed at creating a single internal market has added increasing constraints and rigidity to member countries in the context of an unchanged political-institutional design. The perception that the convergence on the current set of rules is not capable of producing convergence on results, or anyway generally better results, has increased the socio-political fragmentation inside the Union. The result has been an increasing demand for a partial re-nationalisation of sovereign powers, whose physiology comes from the necessity of higher national flexibility. Having to exclude the path towards significant levels of federal governance as unrealistic, the reality of a union made up of sovereign countries competing under common rules imposes a reflection on how feasible changes in the current set of rules could accommodate the increased demand of national flexibility. Focusing on the euro area, the paper proposes to revise the monetary operations of the European Central Bank, current fiscal rules and the financial regulatory approach in order to tackle some of the main inconsistencies, rigidities and fragilities in the current design. The new design is thought out to require no changes in the Treaty on the Functioning of the European Union, but at least a minimum political convergence. If successfully implemented, it would contribute to give a viable perspective to the design of the Economic and Monetary Union, capable of attracting those EU non-euro area countries that consider the mismanagement of the recent crisis and of its after-effects reason enough for resisting further losses of sovereignty.