Insights Blog

Social Unions Needed to Prevent Damage from Financial Crises

March 14, 2018
Social Unions Needed to Prevent Damage from Financial Crises Koji Yamada

Economist Willi Semmler, director of SCEPA’s Economics of Climate Change project, gave a presentation in Sorbonne, Paris, as part of the Financial Regulation Lab (LabEx ReFi).  

Semmler discussed the different routes the United States and European Union (EU) have taken on financial regulation in the aftermath of the global fiscal crisis. While both the United States and the EU instituted stricter capital requirements after the Great Recession, the U.S. created a consumer protection agency and set up “too big to fail” arrangements with the largest banks, and the EU is considering a transaction tax, charging fees for transactions between financial institutions.

Semmler argues that to prevent the far-reaching, destabilizing effects of financial market disruptions, the EU must create new institutions. These institutions must promote social protections and equality, creating a “social union.” Because financial market disruptions hit vulnerable populations the hardest, a social union within the EU can stabilize the economy and prevent downward mobility for many Europeans.