Euro crisis: “the right to veto some national economic policy decisions”

Further signs of dissent in Greece at the proposed terms of a new improved bail-out, and the accompanying “humiliating erosion of sovereignty”.

And so far, where Greece has been led, others have followed…

But, for some, every cloud has a silver lining.

“Would it go too far if we envisaged . . . giving euro area authorities a much deeper and authoritative, say in the formation of the country’s economic policies if these go harmfully astray?” asked [European Central Bank president, Jean-Claude Trichet], suggesting “a direct influence, well over and above the reinforced surveillance that is presently envisaged?”

Mr Trichet’s proposals – carefully phrased as hypothetical ideas – came in a speech in Aachen yesterday where he was awarded the prestigious Karlspreis for services to European unity.

The central banker’s boldest suggestion was a “new concept” for the euro zone that envisioned cases of “compulsory” intervention from EU leaders and the ECB in “major fiscal spending items and elements essential for the country’s competitiveness”.

“Confronting the challenges of the future requires strengthening the institutions of economic union – the ‘E’ in EMU,” he said. “Would it be too bold, in the economic field, with a single market, a single currency and a single central bank, to envisage a ministry of finance of the Union?”

As the BBC’s Europe editor Gavin Hewitt points out

Although he argued the precise opposite, the speech was a tacit admission that neither monetary union as it currently functions, nor the bail-outs that have followed, are working satisfactorily.

In his view, rules governing spending within the eurozone need to be tightened.

There are already plans for monitoring and peer review but Mr Trichet has in mind something “well over and above the reinforced surveillance that is presently envisaged”.

When it comes to countries that have been bailed out but are still failing to get their deficits down he proposes that European officials essentially make the spending decisions on behalf of that country.

“One way this could be imagined,” he said, “is for European authorities to have the right to veto some national economic policy decisions”.

A vein running through this speech is the belief that governments can’t be trusted with spending while officials can.

In this vision citizens and voters don’t appear to have a seat at the table.

It’s an indication of the thinking of some of those at the heart of the “European project”.  And it’s thinking that has predictable results…

As Gavin Hewitt also points out

Trichet’s vision would require a change to the treaty. There is little appetite for that amongst member states.

Eight years were spent haggling over the Lisbon Treaty. Treaty change would trigger referenda and, in the present climate, it is not certain that Europe’s voters would back more power shifting away from the member states.

It has long been said that you can’t have monetary union without fiscal union. And you can’t have fiscal union without political union.

Jean-Claude Trichet clearly believes that.

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  • This piece in the Telegraph is very hard – hitting and focuses on the vulnerability of British Banks.

    http://www.telegraph.co.uk/finance/financialcrisis/8556557/Will-Germany-and-France-stave-off-a-Greek-default.html

    The Greek default, which the article predicts, is likely to happen next year. One likely domino effect following a Greek default is that the UK banks will be in need of a bailout by the Government to survive. They ask the question. :

    “But if our banks should indeed become exposed in 2012, this time to eurozone events, would the British government bail them out yet again?”

  • Pete Baker

    Seymour

    You’ve neglected the significant qualification in that speculative opinion piece by the managing director of Europe Economics, Andrew Lilico.

    I expect [Greek] default, probably during 2012. Default will trigger a cascade of wider events across the eurozone. However, other than to Ireland, British exposure would be limited, unless and until bondholder losses reached France and Germany. I don’t expect this.

    Here’s his more specific speculation from 20th May this year.

    Now, if we could re-focus back to the area covered in the original post?

  • wee buns

    Pete
    how do you reckon France’s finances are?
    Were not Italy’s debts reported tuther day as orders of magnitude more than the PIIGS in total?