ifo President Fuest calls for greater cooperation in the EU

Three months ahead of the European elections, ifo President Clemens Fuest has expressed his concern about the state of the European Union. "The EU resembles more and more the Habsburg Empire towards its end, when internal and external forces were striving towards disintegration. The EU, its member states and parliament must take countermeasures. First, the EU must do everything it can to avoid a hard Brexit at the end of March," Fuest said on Tuesday in Brussels at the presentation of the European Report 2019 of the EEAG Research Group. "In the face of trade turmoil, Europe should also remember that it is one of the last bastions of a rule-based, multilateral international order. The EU should therefore work closely with similarly oriented countries such as Canada, Australia, Japan, India, the countries of Southeast Asia and, where possible, China". At the same time, however, the EU should not hinder Chinese investment here, added Fuest, but exert pressure to improve the conditions for European investment in China as well.

Fuest added: "To strengthen the internal cohesion of the euro area, financial markets need to be more integrated. It is also necessary to complete the banking union." This would help to improve risk sharing. It is also necessary for countries with economic problems, especially Italy, to tackle forward-looking reforms instead of warming up recipes from the past. Fuest referred to examples such as Denmark, Sweden, Finland and the Netherlands. "These countries have significantly improved their economic performance with reforms," he said. "This could also be a way for Italy to get out of years of stagnation, but with reform measures geared to the Italian situation". In view of US President Donald Trump's policy, Fuest suggested that EU countries cooperate more closely in defence policy. "Obviously, we can no longer expect everything from the US."

The EEAG research group expects the EU's economic growth to decline to 1.5 percent in 2019, from 1.9 percent in the previous year and 2.5 percent in 2017. Global economic growth is expected to weaken to 3.0 percent in 2019, from 3.2 percent last year and 3.3 percent in 2017.

Publication:
Andersen, Torben M., Giuseppe Bertola, John Driffill, Clemens Fuest, Harold James, Jan-Egbert Sturm and Branko Uroševic, "EEAG Report on the European Economy 2019: A Fragmenting Europe in a Changing World", CESifo Group Munich, Munich, 2019, 01–107 | Details