Vox
October 27, 2011
EU leaders are at it again. This column argues that the crisis won't be over until the underlying flaw of the euro is fixed – namely the separation of monetary and fiscal policy. German public opinion has to realise that the euro was built on imperfect foundations and that these imperfections must be corrected. Meanwhile, the Italian president of the ECB will need all his technical and political expertise to keep the Eurozone together.
It is now a habit. Every three or four months, European summits are devoted to ending the Eurozone crisis. Each time tough and controversial decisions are taken and new innovations to European governance are introduced. For a few weeks things seem to get better, but then everything goes back to being as it was, if not worse. Why?
What should be done to solve the problems for real?
The Eurozone core weakness has been known since the beginning – the separation of monetary and fiscal policy. This is the principle upon which the European monetary union was built, but the crisis made it clear – without a central bank acting as lender of last resort, highly indebted countries are too vulnerable to changes in market confidence. Unless this central problem is addressed, the crisis is unlikely to reach a turning point.
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