Sunday, June 10, 2012

What does Europe really need?

Food for thought:

Many, among them George Soros (see eg "We need to do whatever we can to convince Germany to show leadership and preserve the European Union as the fantastic object that it used to be. The future of Europe depends on it", June 2) and  Charles S. Maier (professor of history at Harvard, "Europe Needs a German Marshall Plan" New York Times, June 9)  have called on Germany and its PM, Anglea Merkel. to "save" the Eurozone and even the EU. The latter even suggests a German Marshall on Europe.

But as Soros points out in his Trento speech/comments )see link above) the Euro crisis started with a flawed EMU design in the Maastricht Treaty (for which he blames the "center" of Europe as opposed to the "periphery")and adds this crucial comment: "The first step was taken by Germany when, after the bankruptcy of Lehman Brothers, Angela Merkel declared that the virtual guarantee extended to other financial institutions should come from each country acting separately, not by Europe acting jointly".

As he points out, "it took financial markets more than a year to realize the implication of that declaration, showing that they are not perfect".  That Merkel pinpointed the flaw and limitation of the Maastricht based Euro and EMU.

I would add that Merkel's behaviour in the last 2-3 yrs has turned European political union from a difficult to an impossible mission.

So which are the key elements of a solution to the European predicament?

a) The austerity road? Fewer and fewer yet still many think so.
b) A German Marshall Plan on Europe?
c) An orderly termination of the Euro project, possibly with the beginning of a political union project that may or may not include Germany (a political union of the willing and able (in terms of national Constitutional constraints) not necessarily the same 17 as the Euro, after all such a political union would not include a common currency at first, not until full union was established and working)?

If we accept the premise that the Euro was working until Merkel burst the bubble of a flawed Euro architecture with her post Lehman comments, then maybe, I say, what is needed the most is neither austerity not money or unrealistically urgent (if not clumsy or even barbaric) "structural reforms" in the labour markets etc (economic cold showers for the ordinary people, while popular with many economists and policy makers, can be viewed as a form of "torture") but a concrete affirmation of unity of Europe, the one that Merkel may have burst with her post Lehman comments Soros refers to or Merkel's "micromanagement" of the Euro crisis that inter alia alienated The Greeks and many other Europeans, thus making a political union a near mission impossible (while I( argue, before that, it was difficult already).

What would constitute such a re-affirmation though?

That is Europe current 10 trillion plus survival question.



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Nick

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