Delors, Merkel want full fiscal union

In recent weeks I have been saying that rather than accept the end of the euro so that the weaker European countries could devalue their respective currencies (a step that would be very damaging to many people but would allow the overall crisis to be healed), the European powers-that-be would push in the opposite direction—toward the total fiscal and political unification of Europe. I predicted this because it has been their true agenda all along. The current EU system, in which the members have the same currency but still exercise control over their respective spending and taxing policies (allowing the weaker countries to indulge in fantastic deficit spending on the expectation that the rest of the EU would rescue them in order to save the euro) is not sustainable. The sane recourse is to give up on the EU project. But expecting the European leadership class to give up on the EU project would be like expecting the American leadership class to give up on black equality. They can’t give up on the EU. They can’t conceive of giving up on the EU. And if push comes to shove they would sooner let Europe be burnt to a cinder than give up on the EU. Why? Because, in their minds, the EU is the only alternative to the return of nationalism, which, in their minds, is tantamount to the return of Nazism.

That’s the insane stick that drives the EU project. The insane carrot that drives the EU project is the belief in a totally organized and unified Europe, as a step toward a totally organized and unified mankind.

Delors: the face of humanity’s future

Over the last week European leaders have become explicit that their solution to the debt crisis is total fiscal unification. Consider the Telegraph’s December 2 interview with former EU honcho and wise man Jacques Delors. He declares that errors that were made when the euro was created made the current debt crisis inevitable. And what were those errors? Mainly that the euro, in the Telegraph’s paraphrase of his words, “came into existence without strong central powers to stop members running up unsustainable debts.” I.e., the EU came into existence without full fiscal union, leaving to its members a shadow of national sovereignty.

The Telegraph article also mentions that Angela Merkel last week

hailed what she described as concrete steps towards the creation of a “fiscal union”.

Here’s the article:

Euro doomed from start, says Jacques Delors
The euro project was flawed from the start and the current generation of European leaders has failed to address its fundamental problems, Jacques Delors, the architect of the single currency, declares today.

In an interview with The Daily Telegraph, Jacques Delors, the former president of the European Commission, claims that errors made when the euro was created had effectively doomed the single currency to the current debt crisis. He also accuses today’s leaders of doing “too little, too late,” to support the single currency.

The 86-year-old Frenchman’s intervention comes the day after France and Germany took another step towards the creation of a full “fiscal union” within the European Union and David Cameron insisted that Britain must remain a major player in Europe. Mr Delors, who led the commission from 1985 to 1995, played a central role in the process that led to the creation of the euro in 1999. In his first British newspaper interview for almost a decade, he says that the debt crisis reflects a threat to Europe’s global role and even basic Western democratic values.

Mr Delors claims that the current crisis stems from “a fault in execution” by the political leaders who oversaw the euro in its early days. Leaders chose to turn a blind eye to the fundamental weaknesses and imbalances of member states’ economies, he says.

“The finance ministers did not want to see anything disagreeable which they would be forced to deal with,” he says.

The euro came into existence without strong central powers to stop members running up unsustainable debts, an omission that led to the current crisis. Now that the excessive borrowing of countries such as Greece and Italy has brought the eurozone to the brink of disaster, Mr Delors insists that all European countries must share the blame for the crisis. “Everyone must examine their consciences,” he says.

However, he singles out Germany for its strict insistence that the European Central Bank must not support debt-stricken members for fear of fuelling inflation. The euro’s troubles spring from “a combination of the stubbornness of the Germanic idea of monetary control and the absence of a clear vision from all the other countries”.

Famous in Britain for his public clashes with Baroness Thatcher in the 1980s over closer European integration, Mr Delors says that he shares some of the concerns that were expressed by British politicians and economists about the euro before its creation.

When “Anglo-Saxons” said that a single central bank and currency without a single state would be inherently unstable, “they had a point”, he admits.

Because Britain is not in the euro, it is not “sharing the burden”, Mr Delors says. However, he claims that the UK is “just as embarrassed as the Europeans by the financial crisis”, not least because some of the measures put in place to deal with the crisis pose a threat to British interests.

For example, he says, the creation of a common “Eurobond” underwritten by all eurozone governments and traded in Paris and Frankfurt would be a “big worry” for the City of London. “I can see Mr Cameron’s worries,” he says.

Such is the scale of the crisis, he warns, that “even Germany” will struggle to find a solution. “Markets are markets. They are now bedevilled by uncertainty.”

The Prime Minister was in Paris yesterday for talks with President Nicolas Sarkozy before next week’s EU summit. The meeting will begin discussions about changing the union’s basic treaties in response to the debt crisis.

Chancellor Angela Merkel of Germany insisted yesterday that such a treaty change was necessary and hailed what she described as concrete steps towards the creation of a “fiscal union”.

British diplomats are increasingly concerned that the 17 governments using the euro could try to strike an agreement on new rules between themselves, effectively excluding non-euro countries such as Britain.

Mr Cameron suggested that the fundamental economic reforms needed in response to the euro crisis did not require any treaty change, setting up a potential clash with Mrs Merkel.

Despite British worries about the treaty change process and Mr Delors’s pessimistic analysis, financial markets are increasingly optimistic that EU leaders are edging towards a deal to support the eurozone.

The FTSE 100 index of leading shares yesterday jumped 62.95 points to 5552.29. British shares have risen by 7.5 per cent this week, the biggest weekly rise in almost three years.

European markets also closed up, with the Dax in Germany gaining 0.74 per cent and the Cac 40 in France up 1.12 per cent.

Earlier, Asian markets closed slightly higher, with Japan’s Nikkei index up 0.5 per cent and Hong Kong’s Hang Seng 0.2 per cent higher.

Posted by Lawrence Auster at December 08, 2011 09:35 AM | Send

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