European Decade of Crisis Prevention
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Deputy Governor of Eesti Pank
Ten years have passed from the great economic recession of 2008. Although the economy started to recover rapidly from the first stage of the crisis, it became clear in a couple of years that it had revealed several significant deficiencies in the functioning of the European Economic and Monetary Union and the common currency euro.
During the crisis, several steps were taken to ensure the functioning of the European Economic and Monetary Union, like the interference of the European Central Bank on bond markets, loans to countries experiencing crisis, etc. Improvement of the functioning mechanisms of the euro area was also started in order to make it stronger in the future. As a result of that, adherence to the common agreements and rules of the euro area and the coordination of economic policies has considerably improved, the banking system and supervision over it has been noticeably strengthened, mechanisms for managing various economic crises have been established. Several researchers have drawn attention to the limited capability of the euro area to jointly smooth out the setbacks in the economies of the member states as one of the weaknesses of the Economic and Monetary Union. There have been no remarkable changes in this regard, although the Banking Union and better coordination of economic policies should improve the situation to a certain extent. Keeping in mind the experience of other federal countries, first of all the greater integration of capital markets through the private sector would enable to share risks and in this way mitigate the potential setbacks in particular countries.
In recent years, it has been proven that the belonging of a country to the monetary union is always a political choice, and the functioning of the Economic and Monetary Union largely depends on the political will and ability of its member states to contribute to its functioning. Although several improvements have been made in the European Union and the euro area to reduce the impact of possible crises, the stability of economy in the euro area is first of all protected by the responsible economic and budget policy of the member states. Main responsibility in preventing the crises, responding to them and managing them still lies with the member states. For Estonia, too, it means that the main responsibility for preventing setbacks and overcoming them is in the hands of the Estonian policy-makers. Responsible budgetary and economic policy would help us to overcome the crises by ourselves in the future, and increasing connection with other countries of Europe, mainly through investments, would help to reduce the impact of the shocks in Estonia on us.