Spiegel: Castles in the Sky – The Fundamental Problem with Efforts to Save the Euro

From Spiegel Online / Michael Sauga – The Fundamental Problem with Efforts to Save the Euro:

It Works or it Falls Over

The status quo still applies when it comes to the affairs of the EU. Whenever something goes wrong in the gears of the community, European politicians call for more integration. They see the crisis as an opportunity and, in doing so, are adhering to the traditional Brussels motto that Europe functions like a bicycle: if it doesn’t move forward, it falls over.

For dedicated Europeans, it is self-evident that the road leads to Brussels, and it comes as no surprise that the European heads of state portrayed themselves as great promoters of the European idea at their last summit…

Last week’s resolutions offer no solution to the continent’s debt problems. Instead, they are a largely unconvincing attempt to continue building old European castles in the sky, which require both a more tightly knit political union of the continent and the promise of sound budget management…

“3.0 is 3.0”

… Twenty years later, it is now clear that completely different mathematics apply in Europe. EU countries have exceeded the deficit limit of 3 percent of their gross domestic product (GDP) on 97 occasions, but in not a single case were sanctions imposed.

Instead, an exception clause for economic emergencies was added to the once-strictly worded pact in response to German pressure, under the tacit assumption that Europe is in a constant state of economic emergency.

Given this arbitrary interpretation of the European treaties, it isn’t hard to understand why the results were not at all as expected. Since the introduction of the common currency, the euro nations have in fact accumulated more debt, not less. What was conceived as a stability pact has proven to be an agreement that increases instability…

Pursuing the same old Illusionary Policies

politician and sociologist Ralf Dahrendorf, a member of the European Commission from 1970 to 1974. A great proponent of European unity, Dahrendorf was strongly opposed to a unified economic and fiscal policy, even though the EU consisted of only about a dozen Western European countries in the late 1990s. At the time, Dahrendorf felt that the economic cultures of the member states were “too different” for a shared economic policy.

Today the EU has almost twice as many members, and the euro zone itself is a sizeable collection of nations…

A strict set of rules is not well suited to such a colorful club, prompting Dahrendorf to warn against “chasing chimera” in European monetary policy even before the launch of the euro.

His successors are apparently determined to do just that. To safeguard Europe’s currency, they are pursuing the same illusionary policies as they did when the euro was introduced…

The “Divisiveness Pact”

The European Commission needs to finally get “access to economic policy,” … to enable it to force Europe onto “the path of convergence.”

This sounds like a clear concept, but it is also reminiscent of Gosplan, the central state planning committee of the former Soviet Union. The European Commission has already introduced a strict regimen of quotas for products like light bulbs and biofuel, angering many consumers. Under the concepts devised by Delors, Prodi and Verhofstadt, the principle would be applied to virtually the entire economy. It would be a sure-fire way to further increase the public’s disenchantment with Brussels.

It is an affliction of European policy that its protagonists in the national governments are generally split personalities. They call for a unified economic policy, and yet they refuse to cede any power to Brussels. They demand penalties for debt sinners, and yet they prevent sanctions from being imposed. And they invoke the European spirit while stubbornly pursuing national interests. Udo Di Fabio, a judge on Germany’s Constitutional Court in Karlsruhe, speaks of “conceptual limits that can in fact only be exceeded by taking a spirited step in the direction of the federal state.”

But neither governments nor citizens are prepared to take such a step. As a result, the center of power in Brussels is distancing itself from the needs and perceptions of its base. European politicians are still pursuing a path to integration that citizens have long since abandoned.

Since the euro crisis gripped the continent, this divide has grown even more.

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This entry was posted in Budget, Debt Default/Restructuring, ECB/IMF, Economy, EU, Euro / Sovereign Money, Geopolitics, ireland, Superstate and tagged , , . Bookmark the permalink.

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