In global economic governance, leaders are defined by their ability to shape global economic structures in a way that advances their interests and preferences while simultaneously helping to maintain an economic order within which others can flourish.
The functional role of a leader is to provide global economic infrastructures, contributing to global demand, and providing a market stabilizing function in times of economic uncertainty and crisis. In addition to this output side of leadership (what a leader does), there is an input side (what a country or region needs to become a leader). On the input side, there are four requirements of leadership: size, systemic significance, a strong policy framework, and external representation. Together, all these components constitute a framework that can help us view Europe’s leadership role in global economic governance.
When we look at the economic side of the equation, Europe is comparable with the United States in terms of size and systemic significance, although the euro continues to lag behind the dollar as an international currency. When we look at the political side of the equation, however, it is clear that the euro area lacks a sufficiently strong internal policy framework as well as adequate external political representation in the key institutions that govern the global economy. As a result, Europe’s leadership role in global economic governance is not commensurate with its economic size and significance because while the euro area economy is coherent and consolidated, the euro area’s macroeconomic policy framework remains incoherent and fragmented.
This disjuncture between economic consolidation and political fragmentation means that the euro area does not yet have what it takes to fulfill the core functions of a global economic leader.