by Andrew Watt
Right from the beginning, the economy has been central to the whole process, and the political project, of European integration: it is often forgotten that what is now the European Union was once the European Economic Community (EEC). Economic policy, on the other hand, was, until comparatively recently, very much a national matter. Trade policies were, of course, integrated at an early stage. The Common and subsequently the Single Market imposed some limitations on government interventions in the economy, for instance in the area of state aids to domestic producers. But the main responsibilities for economic outcomes – growth, productivity, employment, inequality – and also the main levers of economic policy – monetary and fiscal policy, employment and welfare policies – remained in national capitals. Industrial relations systems responsible for setting wages and working conditions were often located at sub-national level. As European integration progressed, however, policy coordination needs increased and, in a discontinuous process, concrete steps towards a more integrated economic policy framework were taken. As background to the main body of this article dealing with recent debates on reform, some of the most important developments are very briefly reviewed in the next section. We then look at the implications of the still ongoing economic crisis for the debate on economic governance in Europe and the reform proposals put forward by the European authorities. These are then critically assessed before presenting a number of alternative policy proposals.