The Problem faced by the Eurozone

Standard

Anthony Sargeant thinks that the following analysis is interesting. Also one might reflect that Mervyn King as a past Governor of The Bank of England might have some insight into the problem. It may be that the only solution for the Eurozone is either total financial integration within a Federal Europe which is indeed the aspiration of those who support the EU political project : Or dissolution of the Eurozone and the EU political project and reversion to a simple free trading bloc of sovereign countries. The problem is that total financial integration implies central European control of salaries, pensions, taxation, public services. It would be a federation of ‘unequals’ where the future life chances of those living in the ‘less equal’ regions will be determined by the dominant region (presently called Germany). How long that could be sustained and become a true democracy is highly questionable since the inevitable nature of the new European Empire would require an integration of not just every aspect of daily life with inevitably enormous regional inequalities but also an homogenisation of culture and mindset. In essence the whole project would succeed or fail on whether, for example, Sicilians or Greeks would want to, or could be persuaded, cajoled or forced, into adopting a German approach to life and government necessarily abandoning their own culture and identity in the process. It seems an unlikely proposition.

Mervyn King warned that the project is doomed, is it time for the Eurozone to be broken up?

Ruth Lea, economic adviser to the Arbuthnot Banking Group, says Yes.

The Eurozone was always primarily a political project, a major stepping stone to the “ever closer union of the peoples of Europe,” but one with the profoundest economic consequences. Members have no control over their interest rates, their exchange rate or, indeed, fiscal policy. And, as we have seen in recent years, many Eurozone members have paid a bitter price for their loss macroeconomic sovereignty. Under the austerity cosh and with no ability to devalue their currencies, growth has disappointed and unemployment rates remain alarmingly high in Greece, Spain (albeit partly-recovering), Italy and Portugal. Looking ahead, there is no reason to believe the policy situation will fundamentally change. Fiscal discipline is entrenched and unremitting and, contrary to speculation, there are no signs that Germany will ever agree to a fiscal transfer union in order to support the weaker countries. The Eurozone simply lacks the demos and “solidarity” to enable the currency bloc to work for all. It’s time to break it up.

[Read the full article at Source: http://www.cityam.com/235669/as-mervyn-king-warns-that-the-project-is-doomed-is-it-time-for-the-eurozone-to-be-broken-up ]

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s