Further to the question raised in the previous article (Turkey-Realpolitik?) on the future evolution of the EU, the weekend of May 9-10 when the Greek, Portuguese and Spanish government bond markets and banking systems came to the brink of a Lehman-style meltdown, saw European politicians take a further step towards a full-scale fiscal and political union in defence of the Eurozone.
Ignoring the no-bailout clauses of the Maastricht and Lisbon treaties which specifically forbid EU governments from collaborating fiscally to guarantee each others? debts, they created what is essentially a large federal-type, borrowing programme backed by all the Eurozone governments. This has enabled channelling of the results of excess savings from Northern to Southern Europe which, to prove sustainable longer term, should evolve into a full-scale, federal European budget to enable the poorer, less competitive regions to be permanently supported by the richer ones. This would also require the ECB to act as the lender of last resort in the classic role of a central bank, to provide essentially unlimited back-up to any associated emergency lending programmes arranged by European governments. In the longer term, the public spending and tax policies of the weaker Eurozone economies will have to become more aligned with that of Germany to allow the political outfall of such a fiscal union to become more manageable.
Such a fiscal convergence programme as part of a viable single currency union, backed by a European federal budget, is not likely to be put to wide, popular vote particularly in Germany where taxpayers would presumably be unwilling to vote for their money to support other more profligate Eurozone members. Rather this could happen as a result of normal public apathy and acquiescence, managed through political stealth as part of an inexorable but non-democratic process towards the construction of a federal EU.
The Economist magazine sees a fundamental tension at the heart of the eurozone between an increasingly assertive and confident Germany, with an export-driven recovery, looking for greater economic co-ordination involving all 27 members of the EU, stricter rules on borrowing , government spending and improving competitiveness, and France wanting centralised, European economic government within an inner core of eurozone members, more core dirigiste political and less technocratic powers and a limitation on so-called unfair competition with Europe-wide labour standards, tax harmonisation and transfer of funds to weaker members.
Incredible work. Do you have any more articles on this topic and how can I find them ? Thanks. Please let me know at Microni398@yahoo.com – ~The Funny Shirt Guy~
I suggest you look at the sub-article – Eurozone Tensions – under Categories in the right hand index column of the blog page.