May 2010 will go down in history as the beginning of greater economic solidarity in the European Union as a result of the one-two punch of the Greek loan agreed on May 3 and the massive loan guarantee mechanism of May 9-10. But what shape that union will take remains unclear. German Chancellor Merkel wants more governance by rules, to enshrine restrictive budgetary discipline and draconian punishments for violators. French President Sarkozy wants more governance by leaders, with Eurozone countries to form a kind of economic government that determines Eurozone policy on an on-going basis. Neither will work, the first because it is too rigid as well as economically problematic, the second because it is too flexible as well as politically problematic. Neither, moreover, is very democratic.

The sovereign debt crisis revealed the institutional weaknesses of fiscal policies in Europe. To an institutional weakness, it must be given an institutional response. How? We propose the creation of independent, national budget committees, as well as a European committee that would evaluate, on the basis of the information provided by the national committees, the impact of national fiscal policies for the Eurozone. Comparable to the European organization of competition or financial regulation, such an architecture would preserve national sovereignty in fiscal policies while offering a European diagnosis on the economic policy. (in French)

In 1980, the French public debt amounted to 20% of GDP. In 2007, before the crisis, it had risen to 65%. By 2011, it could exceed 85%. The time has come to roll the debt back. It is an urgent task to design a process that reverses the political failures of the last thirty years. But it is equally important to ensure that the weak recovery under way does not stall or, worse, that we end up with a new recession. Thus we face two seemingly incompatible emergencies. Governments seem owed by the financial markets’ “request” for stern deficit-cutting measures, but the markets seem to understand that a new recession will deepen the deficit. This article argues that there is no such incompatibility. (in French)

In 2007, a group presided by Felipe González was set up to write a report on “the future of Europe”, which was delivered to the European Counsel on June 17th. One understands that right now the priorities may be concentrated on finding parades to the attacks of the markets, rather than to envision the distant future of the Union. But this report is capital in more than one way. First because the relief that followed the signature of the Lisbon Treaty gave place to the question of what to do in the next twenty years. Second because the financial crisis obviously imposes to reform the European model of governance and the European policies. (in French)

As a candidate, Sarkozy promised to reform labour markets. His first move concerns the infamous 35 hours workweek, not really a surprise. The shorter workweek had been introduced by the socialist government of Jospin with the explicit aim of sharing work to increase employment. It followed on earlier moves under President Mitterrand in the 1980s and under President Chirac in the 1990s. That the idea was mistaken may be obvious to (non-French) economists, but it remains controversial in France because substantial subsidies, introduced when the Jospin government realized that the measure could, well, actually reduce employment, make it difficult to identify its effects.

The labour force in Britain has grown by 212 percent since 1851; over the same period, the number of jobs has grown by 212 percent. So - ignoring the business cycle - a market economy always provides more jobs, if there are more people «effectively» seeking work. The issue is how to increase the «effective» supply of labour. So let me focus mainly on the supply side of the labour market and, especially, on the problem of mobilising the unemployed in France. I will accordingly say a little about wage flexibility, which should be central to the demand side, and about skills.

A year ago, the European Union was at a loss when Russia cut gas supplies to Europe through Ukraine and thus to Europe. Exactly one year later, Russia cuts oil supplies to Europe through Belarus, and the EU is equally lost. Seldom haws Russia so clearly displayed its principles. It is time for the EU to adopt policies on both Russia and energy. Otherwise, the cost of Europe's disorientation may grow exponentially.

Russia is a market economy, and even its state sector is highly commercialized. In the last few years, the Kremlin has successfully focused on boosting the price of Gazprom stocks, rendering it the third most valuable publicly traded company in the world. Part of this endeavor has been to abolish political subsidies to friendly former Soviet republics and let gas and oil prices approach market prices. Belarus was the last country to enjoy oil subsidies from Russia, and now they are gone.