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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.

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Mr. Van Rompuy said that the EU was in “good shape” as it continued to attract new members. But doubts remain about who would want to join the eurozone right now, particularly with unpopular austerity measures being imposed on Portugal, Ireland, and Greece in return for bailouts.

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In June, ECB president Jean-Claude Trichet called for a single eurozone finance ministry to be created, a move that would centralize taxation and spending powers above the level of national governments.


Such a move seems unlikely, but lesser calls are getting a hearing. Rather than just buying bonds issued by individual eurozone nations, as is happening now, many are calling for the ECB to issue its own “eurobonds.”

Political integration is a logical outcome of currency union, says George Magnus, an economist with Swiss bank UBS who predicted the global economic crash.

“What we’ve learned from the eruption of this crisis – well it’s not really learning, we knew this before, that monetary union on its own probably doesn’t make a union of countries viable – is that you’ve got to have some degree of integration of budgetary and fiscal policy, which speaks to some kind of political union as well," says Mr. Magnus. “Integration is clearly where the crisis is driving the eurozone. But it’s not clear to me, or, I don’t think, to anybody really, how far this process of integration will go.”

One call for EU integration came from an unlikely source.

On Monday, British Finance Minister George Osborne called for closer fiscal ties within the eurozone, despite his country being outside the single currency.

“Eurozone countries need to accept the remorseless logic of monetary union that leads from a single currency to greater fiscal integration," wrote Mr. Osborne in the Daily Telegraph. "Solutions such as eurobonds now require serious consideration if investors are to be convinced about the long-term future of the currency.”

Pan-EU taxes?

“Eurobonds” are just one suggested method of stabilizing affairs – others include pan-European taxes and transforming the €440 billion ($625 billion) European Financial Stability Facility “bailout fund” into a more comprehensive European Monetary Fund valued at up to €2 trillion ($2.8 trillion) and complete with powers of national budgetary oversight – but they all hinge on countries ceding authority to Brussels.

Despite this, Professor Brian Lucey, economist at Trinity College Dublin, says “more Europe” may not be popular, but it’s the only option.

“I think the only feasible answer is ‘more Europe,’ he says. "There are two poles: break-up of the euro is one, but too much has been invested politically for that to happen. The other, equally toxic politically, is a fully integrated Europe taking on a political composition like that of the US or perhaps Switzerland.”

Mr. Lucey says tighter integration cannot be to the point of anything approaching statehood but that failure to recognize the need for fiscal integration is what is now being played-out.

“The euro should have been an outcome of greater fiscal co-ordination," says Lucey. "We put the cart before the horse. A horse can push a cart, but it doesn’t do it very well.”


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