The economic crisis engulfing Europe is fast becoming a political crisis as political leaders give the impression of being incapable of meaningful action. Chickens coming home to roost with a vengeance. The barmy decision to form the eurozone without the concomitant fiscal and political union was high-lighted by those in the UK who opposed UK entry. The voices seeking to take us in to the eurozone have gone very quiet, they should be named and shamed.
There is a deeper crisis, a crisis for democracy as citizens across Europe suffer austerity brought about by political decisions for which there was no democratic mandate. We are entering dangerous times.
See:
http://www.telegraph.co.uk/finance/financialcrisis/8894995/France-and-Germany-clash-over-role-of-ECB.html
http://www.telegraph.co.uk/finance/comment/damianreece/8895375/Political-fires-are-alight-across-Europe-as-currency-debate-burns-again.html
A 'must read'.
http://www.telegraph.co.uk/finance/financialcrisis/8895163/Angela-Merkel-in-bold-unity-bid-to-save-the-euro.html
This is my post on 18th May 2010. Sadly, my prognosis then looks accurate.
http://kentcommunityactivist.blogspot.com/2010/05/europe-near-crossroads.html
As someone who supports UK entry to the euro, but only when our interest rates have been stable for a significant period of time and the exchange rate, which would also need to be stable would result in the value of wages and goods in the UK being the same as the EU in order to avoid high inflation.
ReplyDeleteIn my view, as a dual Master of Economics and a Master of EU Law those calling for fiscal union don't know what they are talking about.
If the political elite lack the ability to converge their economies using a single interest rate, how can they be expected to with a single tax regime across the eurozone?
The only way for the eurozone countries economies to converge is for each region of each member state to converge its economies by varying income and business taxes (e.g. business rates, corporation tax), and use the single interest rate as a baseline to set them.
The channel tunnel could not have been built if the French engineers were drilling in a different direction to the British ones. Equally the eurozone won't be stable if the economies aren't converged heading in the same direction.
Thanks Jonathan. It boils down to making weaker economy's more competitive and this will require asset transfers in the same way as is hapening between the old West Germany and the old East Germany. Convergence demands improved productivity in Greece etc:, but on a level playing field?
ReplyDeleteJH