Where is the euro headed? The race for the top job at the European Central Bank is heating up. In fact, it just got nasty. As this is happening, the Finance Ministers' Council, ECOFIN is preparing to discuss proposals to reform the economic constitution of Europe this Monday and Tuesday.
Axel Weber, head of the German Bundesbank, withdrew from the running for the ECB's top post. Angela Merkel, the German Chancellor, had been pushing for his appointment. He complained on pulling out that there was too much opposition in Europe (meaning among the member states of the EU) for the kind of policies he favours. The most important of those is letting a weak country in the euro zone go bust rather than buying its bonds. That is the most important, as it is the only German policy that the ECB would control.
The agenda for this week's meeting of ECOFIN will discuss a number of measures for dealing with the current euro crisis. The second most important set of proposals intend to combat tax evasion, thereby improving government finances across Europe. It is not a proposal to harmonise taxes, however. That has been and remains a non-starter.
The most important proposal from the Commission is to extend the EU's power to dictate, supervise and punish disobedience of national governments on macroeconomic imbalances. At least it reads that way on paper. What does this mean, and should we care?
First, the supervision and punishment part should be taken with more than a pinch of salt. The language is borrowed directly from the mechanisms that do the same thing for government borrowing, but in practice, have proved illegitimate for the majority of member states in the EU.
Second,' macroeconomic imbalances' refer to most economic trends within national economies, so it would extend the EU's legal right to demand things of national governments into all sorts of areas not currently allowed. It would also allow Europe to claim that it has a legal right to decide on things going on in the private sector. For example, the European Commission has already announced it wants to control is the amount of money that private individuals and companies can borrow for any purpose.
These rules reflect a long-standing feud between the Commission, which is unabashedly supporting 'old Europe' against the newer member states of 'new Europe', that have higher inflation rates, borrowing rates and consumption of goods and services originating from outside the country. The Commission wants to clamp down on current account imbalances, which effectively mean that a country would not be allowed to consume more than it had already earned as a country.
It should be clear this is a non-starter. The Commission has been trying for ages to do something like this and failed. So why is it trying now, and why is it on the Council's agenda for Monday and Tuesday? Germany and the Netherlands have been pushing for their rules, their understanding of which way the euro should go. They have hated the behaviour of the countries now in trouble ever since they were admitted. Now they want to impose the control they never had. They are hoping for the same collapse of self-confidence in Southern and Eastern Europe that happened in the Soviet bloc at the end of the Cold War. The end of history. The end of politics, and the rise of technocratic control.
Axel Weber has looked into the heart of the EU and has seen that the future will be different. We should take note of that, as should all European governments.
Axel Weber, head of the German Bundesbank, withdrew from the running for the ECB's top post. Angela Merkel, the German Chancellor, had been pushing for his appointment. He complained on pulling out that there was too much opposition in Europe (meaning among the member states of the EU) for the kind of policies he favours. The most important of those is letting a weak country in the euro zone go bust rather than buying its bonds. That is the most important, as it is the only German policy that the ECB would control.
The agenda for this week's meeting of ECOFIN will discuss a number of measures for dealing with the current euro crisis. The second most important set of proposals intend to combat tax evasion, thereby improving government finances across Europe. It is not a proposal to harmonise taxes, however. That has been and remains a non-starter.
The most important proposal from the Commission is to extend the EU's power to dictate, supervise and punish disobedience of national governments on macroeconomic imbalances. At least it reads that way on paper. What does this mean, and should we care?
First, the supervision and punishment part should be taken with more than a pinch of salt. The language is borrowed directly from the mechanisms that do the same thing for government borrowing, but in practice, have proved illegitimate for the majority of member states in the EU.
Second,' macroeconomic imbalances' refer to most economic trends within national economies, so it would extend the EU's legal right to demand things of national governments into all sorts of areas not currently allowed. It would also allow Europe to claim that it has a legal right to decide on things going on in the private sector. For example, the European Commission has already announced it wants to control is the amount of money that private individuals and companies can borrow for any purpose.
These rules reflect a long-standing feud between the Commission, which is unabashedly supporting 'old Europe' against the newer member states of 'new Europe', that have higher inflation rates, borrowing rates and consumption of goods and services originating from outside the country. The Commission wants to clamp down on current account imbalances, which effectively mean that a country would not be allowed to consume more than it had already earned as a country.
It should be clear this is a non-starter. The Commission has been trying for ages to do something like this and failed. So why is it trying now, and why is it on the Council's agenda for Monday and Tuesday? Germany and the Netherlands have been pushing for their rules, their understanding of which way the euro should go. They have hated the behaviour of the countries now in trouble ever since they were admitted. Now they want to impose the control they never had. They are hoping for the same collapse of self-confidence in Southern and Eastern Europe that happened in the Soviet bloc at the end of the Cold War. The end of history. The end of politics, and the rise of technocratic control.
Axel Weber has looked into the heart of the EU and has seen that the future will be different. We should take note of that, as should all European governments.
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