Book review: Economic Policy Coordination in the Euro Area by Armin Steinbach.

AuthorOberndorfer, Ulrich
PositionBook review

More than six years ago, the Eurozone crisis broke out. Some, but not many economists had seen it coming. Today, Europe still suffers from continuing woes. But do economists at least know (better) what kind of policies would have prevented the crisis? Which measures help dealing with it? And what steps would avert equally disastrous consequences in case of renewed shock waves from the real economy or the financial sector?

This kind of questions must have motivated Armin Steinbach to assess the Eurozone's macroeconomic framework within his book Economic Policy Coordination in the Euro Area. The ongoing economic crisis, particularly the one in Europe, has also been perceived as a crisis of the economic profession. Steinbach's contribution is a serious attempt to end both of them. Since the beginning of the crisis, numerous rather general proposals for a revised European economic policy framework have been broadly disseminated. These have for instance foreseen a dismantling of the Eurozone, or, alternatively, the introduction of joint fiscal policy instruments such as joint bonds or joint automatic stabilizers. However, there seems to have been a lack of advice that would take into account feasibility, implementation as well as political implications of the proposed economic strategies. A lack of advice that would fit into the legal framework of the EU, the Euro Area and its member states, as well as their respective political circumstances. This suggests that, in search of the silver bullet for the European economy, horizontality and the integration of other disciplines' results has been weak. The lack of horizontality has gone even deeper, leading in many cases to incompatibility between advice given by macro- and microeconomists. I will get back to this later.

The apparent shortage of tailor-made advice to European policy makers thus calls for multidisciplinary approaches that take into account the disciplines of institutional economics as well as of law and economics. Armin Steinbach is well placed to deliver -and to break the silos. Trained as a lawyer as well as an economist, he has experience in both science and policy making. And indeed, Economic Policy Coordination in the Euro Area is a book that looks at the Euro crisis and the development of institutions in Europe from a multidimensional perspective: Steinbach assesses recent years' reform efforts from an economic as well as a legal and political point of view. While tackling European issues as a whole, he chooses to a large extent a German focus, gives examples from Germany and discusses questions related to German--national--policy choices. This is not necessarily expected from the book's title, but can nevertheless be considered as justified, given Germany's size and its importance in the...

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