Eurozone Governance: From the Greek Drama of 2015 to the Five Presidents' Report

Greece’s membership of the eurozone has long been problematic but these problems came to ahead in 2015 with an astonishing standoff between a newly-elected Greek government led by Alexis Tsipras and a coalition of fiscal hawks headed by German Finance Minister Wolfgang Schäuble. This standoff escalated in July after Tsipras called a referendum on the terms of stalled negotiations with the European Union (EU) and International Monetary Fund (IMF)and Schäuble tabled the idea of Greek exit from the eurozone. Grexit appeared to be a matter of hours away before the heads of state or government brokered a short-run solution of sorts.This deal, which paved the way for €85 billion in additional loans, had brutal conditions attached. It ended the Greek drama of 2015 but neither resolved the contradictions surrounding Greece’s membership of the eurozone nor secured the fate of economic and monetary union(EMU) more generally. Over the course of the year, the eurozone also grappled with other challenges, including slow economic growth, deflationary pressures driven by low oil prices, the implementation of recent reforms to eurozone governance and the prospects for economic, fiscal, financial and political union set out in the Five Presidents’ Report. The overarching theme of 2015 was that eurozone governance faced profound problems of legitimacy that policy-makers appeared more adept at aggravating than alleviating.This contribution takes stock of these and other developments in eurozone governance in 2015. Section I gives an update on the euro crisis, focusing on the eurozone’s standoff with Syriza. Section II looks at the economic outlook in 2015 and the factors driving the eurozone’s tentative economic recovery. Section III explores key developments in eurozone monetary policy, including the European Central Bank’s (ECB) new programme of quantitative easing. Section IV focuses on the first full year of the single supervisory mechanism (SSM) and the launch of the single resolution board (SRB). Section V turns to economic policy co-ordination and reviews the Commission’s efforts to promote a more flexible interpretation of the stability and growth pact. Section VI takes stock of the Five Presidents’ Report and Section VII addresses external representation and the IMF’s complex and evolving relationship with the eurozone.