Europe tomorrow: TIE asked two experts what the likely makeup of the Eurozone will be five years from now? Fifteen years from now? And what effect will any predicted change have on the European system as a whole? Here's what they said.

• Author: Siebert, Horst
• Position: Brief Article

More Self-Confidence For The ECB

In five years, some of the new members of the enlarged EU, such as Estonia, will have joined the Eurozone. The UK may be in as well. The Eurozone thus will be more heterogeneous. The ECB will have introduced some rotating system for its decision-making, but its job to provide a stable money will become harder in the more heterogeneous environment. I expect that the ECB will have gained additional independence and self-confidence towards politics. This is absolutely necessary because conflicts between monetary policy at the European level and national political decision-making, for instance in fiscal policy, are likely to become more pronounced. By then, the EU will not have adjusted its intergovernmental decision-making process by shifting some power to the European Parliament and by changing the decision rules. A blockade in the form of intergovernmental decision-making with a negative impact on economic dynamics and growth cannot be ruled out. The necessary economic reforms in the labor market and the social security systems will not yet be done in three larger continental countries.

In fifteen years, the ECB will (hopefully) have won two or three larger battles between monetary policy and the national interest of major members of the Eurozone. The three major continental countries--Germany, France, and Italy--have reformed their labor markets and their social security systems making monetary policy easier in a more elastic economy. One of the concerns of the ECB will be to develop a monetary strategy for the aging societies on the continent where labor supply is likely to shrink.

HORST SIEBERT

Horst Siebert is President of the Kiel Institute of World Economics and a member of the German Council of Economic Advisors.

Political Union Will Be Sustained

In 2007, the EU will comprise twenty-five European nation states with ten more waiting in the wings. The euro will be legal tender for eighteen nations, including all "old" EU-15 members. It will account for 34-40 percent of the volume of the world financial markets and have reached a 23 percent share in foreign reserves. The convention, under the leadership of Giscard d'Estaing...