Gideon Rachman writes at the Financial Times – Political union cannot fix the euro:
Those who argue that “political union” is the solution to the current crisis seem to believe that Europe’s problem is institutional. Unlike the US, the eurozone does not have the political institutions to back up a common currency. But if Europe was just equipped with a finance ministry or the facility to issue eurozone bonds or to tax citizens directly, everything could be fixed.
This is a profound misdiagnosis of the crisis. The real problem is political and cultural. There is not a strong enough common political identity in Europe to support the single currency. That is why German, Dutch and Finnish voters are revolting against the idea of bailing out Greece again – while Greeks riot against what they see as a new colonialism imposed from Brussels and Frankfurt.
To argue that even deeper political integration is the solution to this mess, is like recommending that a man with alcohol poisoning should treat himself with a more powerful brand of vodka.
It is important to understand that the origins of the current crisis lie precisely in the dream of political union in Europe. For the true believers, currency union was always just a means to that greater end. It was a way of “building Europe”. If bits of the construction were missing – such as a European finance ministry – they could be added later…
…if elite decisions go wrong, they create a backlash – which is exactly what is happening in Europe now. German voters were told repeatedly that the euro would be a stable currency and that they would not have to bail out southern Europe…
The politics of fiscal transfer are tricky, even in long-established nation states. Think of the strains between northern and southern Italy; or between Flanders and Wallonia in Belgium. But the tensions are far worse in a newly created eurozone of 17 nations with different histories, cultures and levels of economic development. Simply ignoring this – and trying to press ahead with a deeper political union – would invite an even more dangerous backlash in the future.
But if political union is not the answer to Europe’s problems, what is? There are two possible solutions. The eurozone leaders might somehow patch the current system up. Or the weaker members of the currency union – above all, Greece – could leave. That process would be chaotic and dangerous. But Greece, as it stands, is a demoralised country that has lost the sense that it controls its own government. Leaving the euro might just be the beginning of a national regeneration.