Monday, 12 December 2011

Eurozone's problems not resolved.

The current imbroglio in Europe is as a consequence of history.  Deep in the consciousness of the political classes are the empires that once existed: Austro-Hungarian, USSR, German military conquest in two world wars. To this add the fear of Wiemar Republic inflation,  France's inferiority complex and the UK's role in the two world wars.  To a greater or lesser extent all these influences determined the process by which the nations of Europe came together over half a century to form the EU.    Not only that, the ghosts of previous conflicts are in play today.

The vision of a united Europe, indeed a United States of Europe was bold, but old wounds run deep and it is to be expected that national interests will be in competition with unifying proposals.  The major causes of the continued disunity in Europe are:

1. The power of the European Commission which is subject to little democratic control.
2. The abject failure of the European Parliament to exercise any meaningful democratic control.

The democratic deficit in the EU (and the manner in which the EC/EU interfered in the internal political affairs of Greece and Italy) is the root cause of the unhealthy tension between national sovereignty and pooled sovereignty.

The formation of the eurozone without a lender of last resort or centralised fiscal policy has been a disaster, but at the time of its formation it was unlikely that nations would voluntary give up sovereignty, even though it was necessary if the eurozone was to work.  It is the recognition of the lack of centralised fiscal management which is behind the proposals vetoed by the UK at the Brussels EU summit.

The problem is that the decisions taken in Brussels will do nothing to overcome the pressing problems of sovereign debt, economies moving into recession and years of austerity for nations with failed or failing economies.

What is needed is:

1. The ECB to be given the powers of a central bank
2. Debt mutualisation
3. Asset transfers to struggling economies
4. Policies to encourage economic growth and deal with the imbalance between core and peripheral countries' economies.

Unfortunately nothing along these lines is currently on offer, the reason being that nationalism is rearing its head and politicians are constrained by history. 

The articles that follow develop some of the themes outlined above.,1518,803097,00.html
Why Merkel's triumph will come at a high price.,1518,803122,00.html
Cameron's veto may herald end of Britain's EU membership,1518,803278,00.html
Cameron insists EU membership vital to Britain.
Interesting article on French political scene.

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