There are reports that France and Germany are conspiring with the EU commissars to restructure the EU and the eurozone. Putting to one side the issue of the likelihood of the financial markets destroying both the eurozone and the EU as investors fret about sovereign debt repayment, what structures are likely to emerge?
One scenario is for a two speed EU with the current seventeen eurozone states moving to a fiscal union (and inevitably a political union) which, acting as a bloc, would dominate the EU. The remaining ten EU members would be constantly outvoted and would effectively be colonies of the dominant group. It is questionable whether the ten non-eurozone countries would accept this and the possibility arises of these counties breaking away from the EU and forming there own trading group along with any other countries not in the EU willing to join.
What would be the role of the European Central Bank in the new eurozone? Would it have powers to engage in quantitative easing, would it be part of a transfer union process? The role of the ECB will be central to the new eurozone. Currently Germany has no desire to see the power of the ECB extended beyond its inflation control role. The new governments in Italy and Greece are committed to long term programmes of austerity and remaining within the eurozone. The question has to be: how long will citizens of those countries put up with a poor standard of living and control from outside? Would they not be better off leaving the eurozone and joining the ten nations not hamstrung by ECB interest rates and a totally unrealistic value of the euro?
It is patently clear that power within the new eurozone will reside in Berlin. France is merely a poodle.
The irony, which is lost on the EU commissars, is that the move towards ever closer fiscal and political union will destroy the EU as the pace of integration will not be stomached by many of the constituent countries. Countries in eastern Europe which suffered under Nazi occupation and then Communist domination will not willingly accept rule from Berlin.
All empires disintegrate and it may be that as hubris in Berlin, Paris and Brussels comes to the fore we are witnessing the beginning of the end for the eurozone and the EU.
Italy: wobbling domino
Worries over EU's future