“Euro area reform deal is a disappointing compromise”

EU finance ministers have struck a euro area reform deal. Marcel Fratzscher, President of the German Institute for Economic Research (DIW Berlin), comments:

The euro area reform deal is a disappointing compromise. It does not advance Europe; rather, this deal reveals that apparently, another serious crisis must occur before governments will abandon their national egotisms. The lowest common denominator in the negotiations was so low that little is likely to change. The compromise regarding the banking union is so vague I doubt it will be realistic to implement it soon. Agreements on the capital market union and to advance integration in the internal market for services are completely lacking in this deal. There is no macroeconomic stabilization tool to help struggling countries avoid a recession. Additionally, on the one hand, fundamental fiscal policy reforms to bring about debt reduction are lacking. On the other, governments are missing the leeway necessary to combat the crisis. Both Germany and France are on the losing end of this compromise. These reforms neither reduce nor efficiently share risks in Europe. I fear the reforms will not promote growth and stability in Europe; instead, countries will once again be left to their own devices. This will not halt the populism and nationalism growing in Europe.