On March 6, 2012, the GMF Warsaw Office hosted a public panel discussion dedicated to the European crisis and its implications for Poland. The panel included  Minister Mikolaj Dowgielewicz, Secretary of State for European Affairs and economic policy at the Ministry of Foreign Affairs, Poland; Dr. Guntram Wolff, Deputy Director at Bruegel; and Joseph Quinlan, a leading expert on the transatlantic economy and transatlantic fellow at GMF. The discussion was moderated by Dr. Andrew Michta, GMF Warsaw Office Director.

Minister Dowgielewicz started the discussion by highlighting the new security mechanisms for the Euro as well as remaining issues that still need to be tackled, such as the volume of the European Stability Mechanism (ESM) and transitioning from the European Financial Stability Facility (EFSF) to the ESM. The Minister argued that the success of implementing these safety mechanisms relies heavily on the sustainability of political will with regards to fiscal consolidation and discipline. According to Minister Dowgielewicz the prerequisite to pulling out of the crisis is a balance between consolidation and growth, and as such, a growth agenda for the EU would be absolutely essential. The Minister pointed out that although the fiscal treaty is an intergovernmental agreement, it is designed to reinforce economic governance and the credibility of the Euro. The current most pertinent issue, however, is the adequacy of the fiscal treaty elements to stabilize the markets without breaking the mandate of the European Central Bank (ECB). The Minister argued that more elements are needed, including a reevaluation of the EU architecture, as well as economic governance reforms complementing the political ones.

Minister Dowgielewicz’s remarks were followed by Dr. Wolff’s take on the current economic situation. Dr. Wolff stated that an enlargement of the Eurozone would entail an augmentation of the ESM, which is currently too small to support Member States in the event of an economic crisis. Dr. Wolff also mentioned the incomplete institutional set-up within the EU. Comparing the European system to the fiscal union in the United States, he defined the elements which are lacking within the EU, like a fiscal stabilization tool and a federal fiscal institution, which would back up insolvent banking problems, should such arise. Hence, Poland will want to ensure that the EU budget is a modern one, where the largest share of the budget is not appropriated for the Common Agricultural Policy (CAP). According to the Minister, the crisis is not over yet, but the Euro will survive. By presenting the willingness and ability to enlarge, the Eurozone’s credibility could be strengthened. In consequence, the Minister predicted that the Eurozone could have more than 20 Member States within the next 5-7 years.

Minister Dowgielewicz and Dr. Wolff also addressed the issue of weak EU institutions and their inability to quickly react to market demands. EU institutions were designed to be weak and in order to exercise leadership within the EU, these institutions, and in particular the European Commission, must be strengthened. Furthermore, the complexity of the European Union entails time-consuming procedures, and thus, a slower reaction to the changing markets.

GMF Transatlantic Fellow Joseph Quilan was last to make his remarks and brought the transatlantic and the US angle to the discussion. With regards to the current economic situation, Mr. Quinlan defined the US-EU dialogue as a chain of missed opportunities with less and less cooperation and coordination between the two since 2008. He pointed out that whilst there is constant discussion about a two-speed EU economy, more attention should be focused on the two-tier transatlantic economy, as the US and the EU economies are increasingly moving at two different speeds. The US companies’ attitude towards capital is changing and corporations are now spending and investing money, whereas European corporations are hoarding capital due to uncertainty and lack of confidence. Mr. Quilan stated that even though there is a disconnect between the growth of the US and EU economies, the transatlantic economy is the bedrock of the global economy and a perfect manifestation of globalization. Policy makers on both sides of the Atlantic should work together to diminish the tension points arising from diverging market and citizen demands. Mr. Quinlan’s solution to the crisis is to start expanding “the economic pie”, by e.g. ensuring more growth. Even if it is a two-tier Europe, the ‘pie must grow’ and the faster growing parts of the EU must eventually pull the slower ones.

In his closing remarks, Minister Dowgielewicz stated, that whilst there is no easy solution to the problems at hand, the current situation must be a stepping stone for the process of strengthening institutions and regulations.