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'Eurobonds' anyone? Officials call for EU-wide fiscal policies to ease debt crisis

But that hasn't dampened calls from critics who worry that centralizing European Union fiscal policy would impinge on national sovereignty – and possibly even worsen the crisis.

By Correspondent, Angela NagleContributor / August 10, 2011



Dublin, Ireland

While America’s credit downgrade and rioting in London have grabbed the headlines, the financial crisis in the eurozone rumbles on.

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The European Central Bank (ECB) moved Wednesday to buy Spanish and Italian bonds in the hope of staving off a spiral in debt costs or the need to bail out such large economies.

The move was widely viewed as a positive – if stopgap – measure, but market volatility continues.

Stocks across Europe have plunged amid worries that France is about to follow the US in losing its triple A-rating. The share dive, now affecting markets across the continent with France, Germany, and Spain slumping by more than five percent, is led by fears over bank solvency. Stock in France's Société Générale alone dropped by almost 15 percent, followed by BNP Paribas and Credit Agricole losing up to 10 percent of their value.

To help stem the crisis, a growing number of European officials are calling for a truly European Union-wide solution to the eurozone’s woes. Even some euroskeptics now agree that the common currency needs to be supported by common fiscal policies that prevent member states from accumulating too much debt and requiring bailouts.

But that hasn't dampened calls from critics who worry that centralizing EU fiscal policy would impinge on national sovereignty – and possibly even worsen the crisis. Such calls for "more Europe," they say, are all-too-typical – and deeply flawed.

“That’s always the answer in Brussels,” says Dan Hannan, a member of Britain’s eurosceptic governing Conservative Party and a British member of the European Parliament. “Whatever the question is, the answer is ‘more Europe.’ If there’s a rainy day in Eindhoven, the answer is ‘more Europe.’ The problem with [an EU-wide fiscal policy] is, you cannot jam countries with wildly divergent needs into the same exchange rates and interest rates.”

A common fiscal policy?

While the euro is the de-facto EU currency, each of the eurozone’s seventeen constituent nation states sets its own fiscal policy.

Ireland’s famously low corporate tax rate of 12.5 percent, for instance, has attracted criticism from German Chancellor Angela Merkel and French President Nicolas Sarokzy.

Thus far Ireland has refused to budge, with Irish Prime Minister Enda Kenny last month dismissing calls for a “common corporate tax base” across the EU as “tax harmonization by the back door.”

'Europe is still sexy'

Last month, President of the European Council, Herman Van Rompuy, declared: “Europe is still sexy.”

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