|
|
The Greek crisis has given new life to a superficial argument: that the euro zone isn’t working because its monetary union hasn’t been accompanied by fiscal and political union.
France’s President Francois Hollande has called for a euro zone government, with its own budget, which would be accountable to the people via a new euro zone parliament. Pier Carlo Padoan, the Italian finance minister, has backed the idea – also advocating a euro zone unemployment scheme.
The European Union’s so-called five presidents have given nuanced support for these ideas. [...] called for a euro zone treasury – effectively a finance ministry for the bloc – and a “common macroeconomic stabilisation fund” to help countries weather shocks.
[...]
Such an ambitious centralisation of economic power is neither needed nor desirable. Nor is it politically achievable.
Creating a common euro zone finance ministry, government, parliament and budget would require a new treaty. This would need unanimous approval of the 19 countries in the bloc, and probably of the nine other members of the European Union, such as Britain, which don’t use the euro.
Euro zone governments do not agree on the details.
[...]
Not so fast. The crisis of recent years has two main causes: lack of competitiveness and excessive government borrowing. There are better ways to address problems of competitiveness than by agreeing a treaty to mandate it; and it is already clear that treaties requiring fiscal rectitude have been pretty useless. To boost competitiveness, the euro zone needs to free up markets. This will also allow the bloc’s economies to adjust more rapidly to shocks without millions of people being turfed out of work.
To be fair, the five presidents acknowledge this. Action is needed at a pan-European level to complete the single market in services, the internet and energy. Creating a so-called capital markets union would soften the blow when a national economy suffered a downturn by spreading the pain across Europe.
The presidents also rightly call for more efficient national labour and product markets. [...]
Finally, there’s debt. [...]The key is to allow excessively indebted euro zone states to go bust. Preventing this was the cardinal sin in the Greek crisis.
If investors knew that governments could go bankrupt, they would be more cautious about lending to them in the first place. The discipline of the markets would replace the discipline of the bureaucrats. The German Council of Economic Experts, known as the country’s five “wise” economists, backed this idea in their special report on the Greek crisis last week.
So there are market-based alternatives to political union that could keep the euro zone’s monetary union on the road. They don’t involve a large transfer of sovereignty to Brussels or the imposition of one-size-fits-all policies on 19 diverse countries. That makes them a better solution.