The recently published Rome Declaration (European Council, 2017), after a discreetly celebrated anniversary of the 1957 Rome Treaty, shows limited optimism about Europe’s future. This is not very surprising as the European idea has been facing hard times since 2015 when the “Five Presidents’ Report” (European Commission, 2015) pleaded for a deeper integration among member states of the euro area.

This report considers the basic idea that the existence of the euro cannot be neglected when decisions about Europe’s future will be taken. Even if the introduction of the euro in 1998 was a political decision meant to foster economic convergence and political integration in Europe, it was already then quite clear, at least for economists (Mundell, 1961; McKinnon, 1963; Kenen, 1969), that a certain number of conditions should have been fulfilled to make sense of a common currency.

To guarantee a satisfying functioning of an optimum currency area the following conditions should be fulfilled:

• high labour and capital mobility among industries and member states;
• highly integrated and diversified economies;
• a common monetary policy;
• a supranational fiscal policy;
• and finally, political conditions: a sense of solidarity and a belief in a common future shared by politicians and citizens of the common currency area.

But Brexit, the refugee crisis and the rise of populism explain why, two years later, a new publication, the “White Paper on the Future of Europe” (European Commission, 2017), presents different scenarios and takes a much more modest but probably more realistic stance than the “Five Presidents’ report”.

As economic theory clearly suggests a need for deeper integration among the euro area’s member states, only the white paper’s last scenario, “Doing much more together”, seems to take this fact seriously into account. The other four scenarios mention “improving the functioning of the euro area.… limited cooperation in the euro area.… several steps are taken to consolidate the euro area and ensure its stability”, statements that are not very reassuring about the area’s future.

What might then be the EU’s future in general? Heading for a deeper integration seems to be highly improbable, as is a scaling back to a simple customs union. So, a realistic approach has to cope with the fact that the EU is probably heading toward a “Those who want more do more” scenario, which means at least a two-speed union!

But what does this mean for the euro’s future? The euro area should move closer to an optimum currency area meaning that labour and capital mobility must improve and the problem of a supranational fiscal policy has to be solved! The banking union and the capital markets union should improve capital mobility within the euro area, but a consensus about a needed common fiscal policy is still missing, despite the existence of the European Stability Mechanism since 2012. Finally, labour mobility clearly remains a problem in Europe!

No wonder that, every six weeks, Mario Draghi, the head of the European Central Bank, insists on the fact that structural policies are needed to complement monetary policy in the euro area.

Carlo Klein teaches economics and social sciences at the Athénée de Luxembourg and international economics at Miami University in Differdange.