Review of Open Lecture with Dennis J. Snower
The Future of European Fiscal Policy and National Debts
Speaker: Dennis J. Snower, President of the Institute for the World Economy, Kiel
At the ESMT Open Lecture with Dennis J. Snower on November 8, 2011, Jörg Rocholl, President and Dean of Faculty at ESMT, introduced the lecturer and the moderator Mathias Ohanian of the Financial Times Deutschland.
Snower started his lecture with a short word on current proposals about how the euro crisis should be dealt with. Reduction on Greece's debts, a recapitalization of Europe's banks, and/or a firewall in order to stop the crisis' spreading, are not desirable, according to Snower. Equally not applicable is the option to exclude Greece from the EU, as this would not stop the crisis from spreading to other countries. In Snower's opinion, all of the current proposals show huge disadvantages and are therefore not an option for coping with the crisis successfully.
In the next step, Snower explained his view of how the crisis can be solved. According to his theory, firstly each country needs to issue an individual fiscal rule which has to follow some guidelines (e.g., max. 60% debt ratio). Secondly, the fiscal rule then has to be handed over to an independent national fiscal authority. The fiscal authority has a veto right, but the actual power stays with the government, as they create the fiscal rule. Thirdly, the fiscal rule needs to be implemented in the national constitution. In order to have access to a rescue package, a country has to go through all three steps successfully.
The following Q&A session was moderated by Mathias Ohanian. The interesting discussion concentrated on how realistic an implementation of a fiscal rule is and what problems might occur. Another topic were the pros and cons of the German "Schuldenbremse" (debt brake), which was introduced in Germany in 2009.