As discussed in previous blog posts, the problem with the Euro and the current debt crises wracking EU states like Greece and Spain stems largely from the EU member-states unrestrained ability to borrow money in the form of sovereign debt. While the Euro binds the EU together in monetary union, each member state is still able to issue sovereign debt on its own. Greece owes an estimated 350 billion Euros, twice what many analysts think the nation is capable of paying back. This situation came about because of the value of the Euro coupled with the sovereign debt utility being unregulated. Proposals to create a Euro debt market akin to the Federal Reserve’s have been discarded by France and Germany as ‘unworkable,’ most likely because those two nations find it quite unthinkable that they could be on the hook for the debts from borrowing nations like Greece. While borrowing limits could be set by a central Eurobond authority, what real mechanisms of deterrence exist to prevent this sovereign debt crisis from erupting again when any and all discussions of coordinated European economic policies end in arguments about encroachment upon nation-state sovereignty by intra-national EU agencies. If a Eurobond market were to be introduced, indeed, many of the EU member states would be much more restrained in economic policy options. Of course this situation would be intolerable to a nation-state, wracked with economic crisis, that also has to appease citizens and their unions, companies and organizations which place them in power. Because of this need to ‘report’ to an electorate, sovereign states would be loathe to give up such a critical instrument of power like sovereign economic policy. The ability of each state to direct its own economic policies and borrow without limitation have led to the current crisis, so the question becomes more of the extent to which EU integration is possible and the extent to which the EU is viable with or without said level of integration. Increasingly it appears that the EU is not currently viable as a monetary union because of this unwillingness to surrender the reigns of economic direction to an intra-national bureaucracy that is neither elected nor even comprised of the local electorate. Of course, EU member states cannot be forced to abjure sovereignty in economic policy or in other matters unless the EU is willing to martially impose said order. Indeed, the two strains of accommodation, that of sovereign independence and inter-Union monetary cooperation are at odds with each other, their purposes directed toward completely different aims. A Eurobond market would serve as another large, secured debt market that could one day rival the United States; however, without the intense level of coordination needed to make this market a reality, it will be nothing more than a vain dream. Those who favor greater EU integration need to pay close attention to the economic situation in Europe today because therein lies the answer and key to unlocking the future of the Union. Give up sovereignty in return for economic stability or prosperity? Or maintain sovereignty and thus undermine the unity that the EU promises. The Eurobond issue is contentious, with many of the member states of the EU loathe to pay back the debts of profligate members. Imposition of such a device could lead to the dissolution of the EU as a whole, which is not in any way the goal of EU policy. Most intermediate steps are just stop-gaps on the road to preventing chaos. The European Central Bank, and in particular Germany, must be willing to either continue to bail out the debt-wracked member states or gradually integrate the EU member states’ economic policies into a plan for Euro stability and viability.
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