by Charlemagne
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THERE has been a lot of commentary, in the past couple of days, to the effect that Europe is on the brink of a great leap forward in political and economic integration. The theory goes: a bail-out of Greece, accompanied by intrusive monitoring by Eurocrats, would constitute an unprecedented level of EU interference in the fiscal affairs of a member country. Wise birds have murmured that Europe makes its biggest advances in the depth of crises. In France, there has been much fluttering in the dovecotes after Angela Merkel, the German chancellor, said at the February 11th summit that the EU needed an "economic government": an old French idea whose very name was previously verboten in Berlin.
THERE has been a lot of commentary, in the past couple of days, to the effect that Europe is on the brink of a great leap forward in political and economic integration. The theory goes: a bail-out of Greece, accompanied by intrusive monitoring by Eurocrats, would constitute an unprecedented level of EU interference in the fiscal affairs of a member country. Wise birds have murmured that Europe makes its biggest advances in the depth of crises. In France, there has been much fluttering in the dovecotes after Angela Merkel, the German chancellor, said at the February 11th summit that the EU needed an "economic government": an old French idea whose very name was previously verboten in Berlin.
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Paul Krugman, the Nobel prize winning economist and New York Times columnist, has been looking at the pain looming for countries like Greece and Spain as they try to regain competitiveness within the same currency union as far more competitive countries like Germany, and finds that logic dictates a swift move towards integration. The breakup of the euro would be immensely expensive and hugely disruptive, he declares:
I think Europe is now stuck with this creation, and needs to move as quickly as possible toward the kind of fiscal and labor market integration that would make it more workable.
Paul Krugman, the Nobel prize winning economist and New York Times columnist, has been looking at the pain looming for countries like Greece and Spain as they try to regain competitiveness within the same currency union as far more competitive countries like Germany, and finds that logic dictates a swift move towards integration. The breakup of the euro would be immensely expensive and hugely disruptive, he declares:
I think Europe is now stuck with this creation, and needs to move as quickly as possible toward the kind of fiscal and labor market integration that would make it more workable.
I fear I do not agree. Or rather, I think the siren lure of economic logic is blinding a lot of people to the political realities of this crisis. There is no doubt that it was a big risk to launch a monetary union, 11 years ago, without an economic union on top of it, to organise fiscal transfers between different corners of the union that diverged too far from each other. It is also true that market attacks on Greece, identified as the weakest link in the 16 country euro zone, have prompted an unprecedented statement of solidarity from the 27 heads of state and government at their summit yesterday, when they agreed (without details) that they would not let Greece go under.
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