Institute for New Economic Thinking
October 20, 2011
“The European ideal has so much power that crisis and even division will not permanently prevail.” So says Professor Charles Goodhart. At a time when everyone else is doing crisis-mode, Goodhart, the Norman Sosnow Professor of Banking and Finance at the London School of Economics, is looking through the crisis to deeper structural reforms. “The single most important political reform for the EU is to have the President of the European Commission elected by the voters... The purpose of the exercise is to construct a European polity, and power centre, that answers directly to the people of Europe, and is not simply an apparatus managed by national political leaders.”
Goodhart brings back on the table the 2% minimalist federal fiscal counterpart to monetary union: “As has been exemplified in the recent crisis, it is problematical to try to issue money without the power to support that via taxation. Equally without access to money (notably via taxes), the power to undertake counter-cyclical, or cross-country, stabilisation is limited. So, the second proposal is to revisit the exercise that was done, some twenty years ago, to assess what fiscal changes might be needed to accompany a single currency.”
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