Deutsche’s Mayer goes so far as to suggest the creation of a Europe-focused version of the IMF, with the financial firepower to fund rescues of indebted countries if markets demand too high a premium.
That, like the idea of a fiscal union across the euro zone, looks fanciful but it highlights the size of the problem, said Tito Boeri, economics professor at Bocconi University in Milan, Italy.
NATIONAL INTEREST
European governments have essentially gone their own way during the crisis, even if they sometimes presented their actions as part of coordinated initiatives, Boeri said.
French President Nicolas Sarkozy infuriated his Czech EU partners a few months ago when he said the government would like to see French carmakers relocate production to France from Eastern Europe in return for French government aid.
Ireland infuriated German investors in particular last September with its unilateral decision to guarantee bank deposits, which pressured EU neighbors into following suit.
Meanwhile, the European Commission, the closest thing that the EU has to an executive, is set to emerge weaker from the crisis after national governments pressured it into waiving restrictions on state aid for industries.
The commission could be further diminished as a force for integration and enforcer of free competition rules when its top officials are changed by national governments later this year.
That could take a toll on the push toward more open product and labor markets across the EU. Levy said merger and acquisition activity could suffer if the commission became a less vocal advocate of open markets.
INTEGRATION
Poorer EU member states have also been disappointed by the reluctance of rich ones to do more to help them in the crisis.
In April, Germany and Austria said they planned to keep labor market restrictions in place for the EU’s eight ex-communist newcomers for five years after they joined the bloc.
At a meeting of the European Bank for Reconstruction and Development last month, many officials from EU members and non-members in Central and Eastern Europe complained that the EU was not providing enough aid and was largely leaving rescue efforts to the IMF.
This reluctance to get involved suggested the EU might, for some years at least, drag its feet on further expansion of the bloc to include nations such as the Balkan states and Ukraine.
Jean Pisani-Ferry, head of Bruegel, a Brussels think tank, believes EU integration faces a serious setback, crowded out by narrow national interests as governments focus on saving jobs, factories and banks on their own patches.
“There’s a serious problem, because there’s an absence of enthusiasm for the project,” Pisani-Ferry said.
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