Financial Times
June 26, 2012
Yet again, the EU is about to hold a summit to deal with the crisis in the eurozone. Yet again, it is likely to fall far short of a convincing solution. A heavy weight rests on the shoulders of weary and disillusioned leaders. The question is whether there is hope for success.
What is needed, as I have argued before, is a solution that is both politically feasible and economically workable. The former means an ability not only to achieve agreement among governments responsible to national electorates, but also to obtain at least toleration of that agreement among those voters, something that greatly worries Angela Merkel, the eurozone’s most significant politician. Economic workability means offering electorates enough hope for the future to persuade them to elect leaders prepared to stick with membership of the eurozone.
Against those criteria, let us consider three possible solutions: federal Europe; the status quo; and limited reforms.
The broad thrust of proposals for a banking and fiscal union, via eurozone bonds, along with greater fiscal discipline, is to solve the difficulties of today’s fragile eurozone. It is obvious that such measures attract supporters of the European ideal and those who want others to pay for the consequences of past mistakes. It is obvious, equally, that such proposals anger and frighten those who think they will then have to subsidise the improvidence of others.
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