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05 September 2011

NY Times: Europeans talk of sharp change in fiscal affairs


The idea is to create a central financial authority — with powers in areas such as taxation, bond issuance and budget approval — that could eventually turn the eurozone into something resembling a United States of Europe.

The lack of progress has contributed to steep declines in European stocks recently, sending tremors through markets in the United States as well. On Monday alone, several major European markets fell more than 4 per cent, while markets were also down on Tuesday morning in Australia and Japan. “If today’s policy-makers want successfully to stay the course, they will have to press ahead with structural changes and deeper economic integration”, António Borges, director of the International Monetary Fund’s European unit, said in a recent speech. “To put the crisis behind us, we need more Europe, not less. And we need it now.”

The idea of a European Treasury that would enforce fiscal discipline on wayward countries, while also having the power to spread European Union wealth from healthier countries to ones struggling to pay their debts, is fiercely unpopular among voters in many countries. Those in prosperous nations like Germany do not want to see their taxes used to bail out countries that borrowed their way into trouble. And those in weaker nations are reluctant to allow outsiders to dictate how their governments spend their money and tax their citizens.

The eurozone is also moving to increase oversight of countries’ budget plans earlier in the process, and to give the European Commission greater power to propose financial penalties on countries that violate the rules, unless blocked by a large majority of members.

If and when that happens, said Graham Bishop, an independent financial analyst who has advised the British and European Parliaments, it "would be the moment of collective control of an errant state — the final step towards a de facto political union".

Full article



© New York Times


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