ECONOMIC STABILITY AND ECONOMIC GOVERNANCE IN THE EURO AREA: WHAT THE EUROPEAN CRISIS CAN TEACH ON THE LIMITS OF ECONOMIC INTEGRATION

The recent European economic crisis has dramatically exposed the failures of the various institutional mechanisms in place to maintain economic stability in Europe, and has unveiled the difficulty in achieving international coordination on fiscal and financial stability policies. Drawing on the European experience, this article analyzes the concept of economic stability 1 in international law and highlights the peculiar problems connected to its maintenance or promotion. First, we demonstrate that policies that safeguard and protect economic stability are largely regulated and managed at the national level, due to their inextricable relationship with the exercise of national political power. Until recently, more limited levels of pan-European integration did not make the coordination of economic stability policies seem necessary. However, a much deeper level of economic integration makes it very difficult to tackle an international economic crisis through national responses. If EU Member states wish to maintain and deepen economic integration, they must accept an erosion of sovereignty over their economic stability policies. This will not only deprive states of a fundamental anchor of political power, but also create a challenge for the maintenance of democratic control over economic policies. Second, this article argues that soft law approaches are likely ineffective in enforcing the regulatory disciplines required to ensure economic stability.