January 24, 2011
In a recent article in the New York Times, Nobel prizewinner Paul Krugman gave us a very exciting and comprehensive explanation of how to overcome the Euro Crisis.
He explained why Nevada is different from Ireland in the context of economic and monetary crisis. Surprisingly, the answer is simple: Nevada is part of a solid federal system, Ireland is not!
Europe needs to understand that federalism is not a threat but an opportunity. Sharing sovereignty and giving responsibilities to a federal system is a means to ensure long term sustainability and welfare. The current political dispute over economic policy focuses only on the question of whether the more solvent members of the European Union, first and foremost Germany, are willing to accept a socalled “transfer union“.
But: The story of European integration is a story of giving away and sharing sovereignty. It is also a story of accepting the need to help the weaker in the interest of all, hence a question of solidarity. What about the structural funds? What about the Common Agricultural Policy? What about Enlargement? Or what about the principle of the Single Market? To be blunt, the European Union is already by practice a “transfer union”! It is a shame that this principle is now under threat.
The Euro and the monetary union of Europe can only survive when further steps are introduced. The need for a common fiscal and economic policy is obvious and should have priority. This is not only a question of further harmonisation. This is first and foremost a question of willingness, conviction and commitment for Europe.
The more convincingly we now answer “YES”, the sooner nervousness, disastrousspeculation and panic will be over.
But: It is clear that the road back to confidence, growth and stability is painful. Restructuring the European economies, reducing sovereign debt, undertaking effective savings in the national budgets is not easy. But it is all about a coordinated and well defined coherent economic and social policy. And it is all about risk sharing in the Eurozone. The best solution to share risks is common bonds or Eurobonds.
Eurobonds would have the advantage that the entire Eurozone takes responsibility. It is not only that solid states like Germany are taking over all the risks together with higher interests. In the medium and long term, solid states will alsohave substantial advantages when sharing more responsibilities and solidarities.
This is the idea of Europe: Being responsible, sharing together risks and also gains, in one word: to be “solidaire”.
Solidarity is the key to success!Ernst Stetter