Monday, March 4, 2019
Photo credits: Avij / Wikipedia
The Finnish think tank Ajatushautomo Kompassi together with Sallux organized an event on the “Future of the EU and EMU” at the University of Helsinki on the 23rd of February 2019.
The main guest speakers of the seminar were the former IMF economist Paul Mills (Jubilee Centre), Associate Professor of Economics Tuomas Malinen (University of Helsinki / GNS Economics), Chief Communications Officer of Ilmarinen Mutual Pension Insurance Company and Associate Professor of Economics, dr. Jaakko Kiander as well as dr. Esa Erävalo of thinktank Kompassi.
In his introductory speech dr. Esa Erävalo summarized the history of the EMU as well as the position of different European (and domestic) political movements towards the process of financial and fiscal unification: (“federalism”) of the Eurozone. Different political movements in the so-called left and right are in favor of more integration, yet for very different historical and ideological reasons. A new political divide is forming between those in favor of more central power (federalism) and those favoring nationalism/subsidiarity.
Dr. Jaakko Kiander highlighted in his speech how the Finnish economy grew slower since the Eurocrisis; not because of the common currency but instead due to domestic problems such as the fall of the Nokia-driven high-tech cluster as well as the very high dependency of the Finnish economy on exports. As the 2008-2011 crisis hit economies all over, the Finnish export-oriented economy was hit even worse. Dr. Kiander was of the opinion that the common currency could work without major reforms such as enlarging the EU budget if all nations took the EMU criteria and agreements seriously. The present risks facing the euro arise from the political arena and are to be taken seriously. However, as dismantling the EMU is virtually impossible, in the short run some kind of “muddling through” will continue.
Professor Malinen took a more critical perspective on the euro. His presentation was titled “How will the euro disintegrate”. Professor Malinen explained how the gap between rich and poor countries (GDP per capital) has increased after the Euro crisis and there are several fragilities in the system, both internal as well as external. Eurozone countries are highly indebted and the interest rates are kept artificially low. The ECB balance sheet has grown five-fold since the early 2000s. Professor Malinen explained the process on how technically the euro could be dismantled – or collapse – through a series of economic, political and legal crises.
“Money is a tool for expressing human relations.”
In his presentation “How to save the euro”, economist Paul Mills provided an alternative way of thinking on money and international finance. Dr. Mills has studied the impact and dependence of economy on relationships. Our thinking on economy should be more relational and many of the problems facing the global financial system are due to the fact that we do not value and study relationships the way we should. Several “leaps of faith” were taken while creating the Eurozone and, unfortunately, without a reform, it looks rather fragile. Cultures and local institutions are also not irrelevant to the way a country will manage in a common currency.
Dr. Mills has co-authored a Sallux-published booklet Confederal Europe: A relational Economic Plan - Strong nations, strong union, which can be found here:
A booklet summarizing the event (in Finnish) will be published in May.
Content provided by Kompassi