Once you get to Brussels, all it takes to get to the European Commission (EC) is a 7am wake up, followed by a breakfast of nutella and bread, and then a metro ride to Schuman station. The Commission is located in a section of Brussels that reminds me of the East Side of Manhattan. There are bigger buildings with a professional feel. The commission building itself is long, skinny, and meanders as if it was at the bend of a stream. Security in the building is strict. Parker wasn’t even allowed to bring in some of the letter openers we brought as presents for the speakers. We spent our morning at lectures in one of the meeting rooms of the college of 27 commissioners. We sat a circular table surrounded by windowed rooms for translators—I’ve never felt so official.
Our first lecture was a briefing on the role and functioning of European institutions by James Andreu, a member of the European Commission Department of Communication. He explained that the whole concept of intra-continental European governance organizations emerged post- World War II, when Europeans realized that a mediating body would be necessary to prevent another war from happening. Over the last 65 years, a number of different organizations have emerged that promote economic and social interaction among the nations. Andreu specified that in the current European Union, founded in 1993, there are seven organizations that are essential to managing the economic and political situations between European Nations. They include the European Parliament, the European Council, the Council of Ministers, the European Commission, the Court of Justice, the Court of Auditors, and the European Central Bank. These institutions work in concert to make sure that sovereign states in the Union implement policies and manage the Euro currency. Members of the Euro Area have already adopted the Euro currency, which was instituted on January 1st, 1999.
We then met with Mr. Heikki Oksanen, a research adviser to the Directorate-General Economic and Financial Affairs (ECFIN). He lectured on the causes and consequences of the current economic and financial crisis, including the origins of the crisis, the economic growth and issues of the European Union and Euro Area compared with that of China and America, and how the European’s are responding to the crisis. He really laid the groundwork for some of our later lectures on fiscal responsibility and macroeconomic trade imbalances.
Following Oksanen’s lecture, we had lunch and then another lecture on Euro-Adoption for Central and Eastern European nations by Mr. Zdenek Cech, also of ECFIN. Cech’s lecture covered the basics of the Maastricht Criteria and convergence of national currencies with the Euro. In order to adopt the Euro, one of the things European nations need to do is maintain a deficit no larger than 3% of their Gross Domestic Product (output), and a debt no larger than 60% of the their GDP. This ensures that there government is behaving fiscally responsible and encourages investment and confidence in the country’s economy. After Cech’s lecture we had the opportunity to experience something that very few people have had the opportunity to do. We went to the restricted 13th floor of the EC and saw the private conference room of the college of commissioners where the 27 commissioners make all their big decisions. I believe they said that we were the first group tour to ever visit that room, which is crazy since around 700 people visit the EC a day.
At the end of the day we had two more lectures. One was with Ms. Lucia Piana and the other was Mr. Pieter Bouwen. They both work for ECFIN as well and discussed ways to maintain fiscal responsibility and balance macroeconomic imbalances. Piana focused on the revised Stability and Growth Pact which is a mutual agreement between the European countries to stabilize their government deficits and debt based on the Maastricht crisis. A new update to the agreement is that if the nations do not follow these guidelines, the EU has the ability to impose sanctions and to fine them for 0.2% of the country’s GDP. Bouwen’s talk focused on Excessive Imbalances Procedure. What does the European Union do when there are clear imbalances in the economy of a Euro Area nation? If the imbalances are benign, the EC will not require nations to address the issue, however if the imbalances are detrimental to the state of the nation’s economy then the nation will be required to fix the imbalances. One of the new features of excessive imbalances procedure, which is similar to the Stability and Growth Pact, is the ability to impose a sanction on the delinquent country. What I find most interesting is the new voting design the the EC has developed in order to impose sanctions. Once the European Commission proposes sanctions on a nation, a process called Reverse Qualified Majority Voting (RQMV) is undertaken. Rather than voting on whether or not the resolution should be instituted, it is assumed that it is law. In order to repeal the resolution, the European Parliament must get a 70% majority against the resolution. I think it is an interesting voting theory because it forces people to think seriously about whether or not they want something to happen, because if they don’t act, then the resolution will become law.
After we left the European Commission, we reviewed the entire day with Professor Banerjee before breaking up for dinner. My mind is spinning with economic concepts, and we still have another half day at the European Commission tomorrow before we head to Frankfurt! I’m off to bed, more to come tomorrow.