Governance issues in Euroarea

A nice review of governance issues in Euroarea from ECB President Trichet.

He looks at all three time frames- short term (, medium term and long term. He says all these are interlinked and short-term issues influence long term issues.

In his seminal study of the development of social structures in Europe, Braudel identified  three levels of time which are necessary to understand historical change. The first level was  the longue durée: the deep processes over long periods that shape the structures of  economy and society. Such a long term perspective is important to assess EMU because a
key objective is to further the historic project of European integration.

The second level of time was the époque: the trends that define a particular period of history.  This medium-term perspective is also relevant because the Treaty has set aims for EMU  which are best assessed over the medium-term – most notably ensuring price stability.  

The third level was l’histoire événementielle: the events of the day that shaped the course of  current affairs. This near term perspective is significant because the litmus test of any union  is how it responds to unforeseen stresses and challenges – and EMU has experienced just  such circumstances together with all advanced economies since 2007.  Such a textured approach may give a more comprehensive picture of Economic and Monetary Union. I will discuss each level in turn.

He discusses how the crisis has forced Europe to work on governance issues so that Europe improves over longue duree.

This framework can be applied to most economies. Taker the case of India. It ignored or tolerated corruption/poor governance for a long period of time. These short-term allowances led to deep-rooted corruption in all fragments of the society. It has slowly eroded values over a longue duree and has started toi hurt India just when it is expected to grow over a epoque. How the reforms now i.e.  l’histoire événementielle will shape economy over a longue duree is to be seen.

Nice way of thinking and organising your thoughts.

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