European economic, fiscal, and social policy at the crossroads

In the last decade or more, the European Union has faced a number of challenges, such as the divergence of per capita income after the global financial crisis and the ensuing great recession of 2007-9, the sovereign debt crisis of 2010-12, banking failures, and the creation of an incomplete banking union, a long period of a "near-debt deflation," divisive euro-wide reactions to the immigration crisis (2015/6), the challenges to enact proper policies against climate change, the divergent political trends since the great recession of 2007/9, and now the Covid-19 pandemic-driven recession and its long-run economic and health impacts Already before and after the great recession many plans for reforms, institutions, and policies were suggested to overcome and manage those challenges We will focus on plans to reform the fiscal architecture of the EMU, but we will also argue that the chosen institutional arrangements will have a significant impact on a sustainable Social Europe Yet, how a sustainable Social Europe will arise depends also on how the pandemic recession will be managed on a Euro-wide level Some of the aspects discussed here are echoed by political parties having competed with European platforms for the European election Fiscal governance reform, Social Europe, climate concerns, and immigration issues have been essential core parts of most political party platforms We will discuss and evaluate recent proposals, in particular, on fiscal reforms as well as some aspects of new pillars for a Social Europe We will try to assess which of these comes closer to attaining the triple objective of (a) helping to dampen cyclical divergence, (b) providing fiscal and social buffers, and (c) avoiding national self-interests and promoting joint European goals Designing a proper monetary, fiscal and social policy may provide the opportunity for a sustainable EU recovery from the current pandemic-driven downturn Yet the challenges and road blocks are still numerous