Sunday, 4 December 2011

Fiscal Union?

Angela Merkel plans for fiscal union across the Eurozone are going to end in tears. There is no doubt that the crisis is turning into a catastrophe and while the true fiscal union may provide short term stability in the finances of governments it will lead to longer term social and political unrest - exact what the European project was supposed to avoid.

From what I can tell, the Merkel plan is that it is not true fiscal union anyway. It simply imposes more cap and collar restrictions on governments when they set their budgets and ensures that budgets need to be agreed by the EU. Surely a true fiscal union would have central tax collection and redistribution powers? Of course that would be unacceptable to Merkel as the obvious losers would be the Germans.

Instead she is proposing restrictions on fiscal powers that remove the ability of Eurozone nations to act in a way that does not fit the received wisdom of the mighty wisdom of the economic elite in Europe - the same people that have brought us the current chaos.

With the French presidential elections next year, the loss of sovereignty must surely be too much to bear, although the Italians and Greeks seem to have drifted into a takeover by un-elected governments.

What should they do?
  1. Get rid of the single currency
    • Provides 'firewalls' between countries in case of default
    • Ensures sovereign control on currencies
  2. Turn the Euro back into the ECU but provide a fiscal mechanism within it based on carbon and population
  3. Push for a wider international reserve currency that is not part of any one countries currency (and is managed as 2.)
  4. Allow Greece and Italy to return to democratically elected governments

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