IT has become fashionable recently to repeat the mantra that the eurozone cannot function properly until monetary union is complemented by fiscal and political union.
We are told that "the markets are looking for bold, decisive action" from tomorrow's EU summit in order to inject some confidence into the faltering European economy.
What would this new-style eurozone look like? This week the EU's top four officials, Council President Herman Van Rompuy, Commission President Jose Manuel Barroso, ECB President Mario Draghi and Eurogroup Chairman Jean-Claude Juncker, circulated their shared vision for the medium term. It suggests the establishment of a single European treasury officer, a single banking regulator and common policies on employment regulation and tax levels. Meanwhile Brussels would have the power to veto and rewrite national budgets in countries that breach debt and deficit rules and break promises on restructuring. They claim this would be necessary to avoid moral hazard and foster responsibility and compliance.
The section covering democratic accountability is the slimmest and, as critics point out, not one of this "Gang of Four" is elected. There's the rub. These policies have profound implications for democracy. What is the point of voting in one party over another, if that government's policies can be overturned by bureaucrats in Brussels? Greece has already tasted this bitter pill.
From the outside the eurozone solution looks simple. The zone as a whole has no current account deficit and a lower debt-to-GDP ratio than the US. But there the comparison ends because the sort of United States of Europe proposed by these officials looks politically less akin to the US, with its Bill of Rights and American Constitution, than to the old Soviet Union. And, as Winston Churchill put it: "Democracy is the worst form of government except all the others that have been tried."
German Chancellor Angela Merkel, with an election looming, continues to insist on no move to federalism without EC control of spending and regulation, the principle of no taxation without representation. However, an all-powerful EC presidency, even if directly elected, does not look much like representative democracy. Rather it resembles part of a global process where wealth and power are concentrated in the hands of a tiny elite, while undiluted austerity is on the menu for everyone else.
French President Francois Hollande, recently elected on the back of an anti-austerity manifesto, will fight tooth and nail against surrendering any decision-making to Brussels. The political process cannot move at the speed demanded by the markets.
In the UK both Conservative and Labour governments deserve credit for keeping the UK out of the euro and predicting some of its current difficulty. But British politicians cannot now expect the eurozone to melt magically into a seamless whole. That outcome is not just unlikely. It would not be achieved without triggering national referendums. It is also politically unpalatable and likely to lead to massive social unrest and the resurgence of both left and right-wing extremism. Prime Minister David Cameron would be better advised to promote Monsieur Hollande's growth package, aimed at kick-starting eurozone economies, then come home and repeat the exercise in the UK.
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