This column argues that the euro zone has no time to waste for structural reforms given the risk of default of Greece. The new excessive imbalance procedure (EIP) could play a crucial role in fostering such structural reforms. If needed, the Commission should start the EIP procedure as early as September should countries such as Spain not deliver on their reform commitments. The European Parliament and the public should monitor that the Regulation is applied forcefully and timely.
Policymakers have shown their resolve to significantly step up the governance of the euro area. The so-called "six-pack" consisting of 6 pieces of legislation is in the final stage of becoming effective EU law: the trilogue discussions between the European Parliament, Council and Commission close to final. The remaining differences between the Council the positions of the European Parliament as voted on June 23 should as soon as possible be resolved so that the package can be implemented early. The six-pack has a completely new "Regulation for the prevention and correction of macroeconomic imbalances" (EIP), which has the potential to revolutionize European governance.
Finally, policy action to boost growth and domestic demand is also needed in current account surplus countries but the degree of urgency is smaller. The European Parliament and the public at large should hold the Commission and Council to account on these policy options. Let's make the EIP already a success in version 1.0 and not waste precious time.
The article ends with an afterthought in which reform of suplus countries' deflationary policies is also called "less urgent":
Shocking.
Guntram Wolff's work focuses on global macroeconomics, finance, the euro area economy and governance and Germany. He has joined Bruegel from the European Commission's DG for Economic and Financial Affairs, where he worked on the macroeconomics of the euro area and the reform of euro area governance. Prior to joining the Commission he was an economist at the Deutsche Bundesbank focusing on German and EU public finances, sovereign bond markets and macroeconomics of EMU.
