Only a united, federal Europe can end its financial turmoil
The global financial crisis continues, threatening countries across the European continent. A united Europe requires a united solution. To survive this and future economic storms, the European Union needs the capacity to coordinate economic and fiscal policies on the federal level.
(Page 2 of 2)
The design of this new regulatory framework should be agreed upon with the United States as well as proposed at the G20 Summit. Governance of the global financial system should be consistent across all sovereign entities.Skip to next paragraph
Subscribe Today to the Monitor
Sustaining anti-cyclical fiscal policies to ensure recovery. It is too soon to pull back on policies to stimulate the takeoff of the real productive economy, either in Europe or in the United States.
The Obama administration has decided to maintain anti-cyclical policies in the face of its frustratingly slow recovery. Europe must do the same. Although there are countries such as Greece or Spain that have exhausted their fiscal leeway and are hence compelled to make strong adjustments by slashing budgets, others such as Germany, who have not exhausted their means, must actively lead the way.
The European Investment Bank and the European Investment Fund should be engaged in this stimulus effort through development of essential infrastructure, including in energy and new information technologies, that will create jobs and clear bottlenecks, thus increasing Europe’s global competitiveness.
Federalizing economic and fiscal policies. The various countries should agree to common balance of payments requirements and harmonized minimum taxation. Such a move would make self-evident the need within individual countries to adopt deep structural reforms – for example, more flexibility in rigid labor markets – to help promote competitiveness.
Long-term solutions for a changing world
I am convinced that sharing sovereignty through a federal structure is not objectionable to most Europeans. What they find unacceptable is being subject to reforms that appear to 3 they did not cause. Europe’s citizens want and deserve a long-term solution to their real challenges, not a price dictated by markets that seem to rule over their governments.
Whether the issue is pension and healthcare reform for an aging population, loosening the corporatist rigidity of its industrial relations system, or shifting away from our energy dependence, deep reforms will not be possible unless two conditions are met. First, it must be clear that the aim is to preserve, not dismantle, Europe’s model of social cohesion. Second, the financial system must be governed so that it serves the productive economy and not speculative behavior.
Muddling through the current crisis is sapping Europe’s energy, undermining its post-Cold War confidence, and clouding its vision. History is compelling us to move forward boldly. If we don’t answer that call, the rapidly changing world is going to pass us by.