/ |

Eurozone fiscal union will only exacerbate political crisis: critic

Staff Report

Any moves toward a fiscal union among the eurozone countries as a solution to the region’s ongoing debt crisis will only create an even worse political crisis, a veteran British journalist said at a recent seminar in Tokyo.

“A European fiscal union that many people seem to think is inevitable … implies a European government and a European Parliament with real teeth … and now you’re talking about a United States of Europe,” said Ambrose Evans-Pritchard, international business editor of The Daily Telegraph. “This is an enormous step for the historic nation-states in Europe, and there is no popular consent to such a move.”

Speaking March 25 during the seminar organized by the Keizai Koho Center, Evans-Pritchard discussed the eurozone crisis from the viewpoint as a longtime critic of the European common currency, from which Britain, as a member of the European Union, has stayed away from since the euro’s launch in the late 1990s.

He said the euro project was dysfunctional from the beginning “basically because all the (participating) countries were obviously such different animals, or in economic terms, (the eurozone) was not an optimum currency area.” Critics of the euro including himself have thought the common currency “would disintegrate after a protracted crisis,” but even worse than disintegrating, the protracted sovereign debt crisis has triggered moves toward a fiscal union, which are creating “an even more dangerous political crisis over time,” he said.

“It was always a toss-up which would happen first — either an austerity fatigue (in the southern European countries mired in the debt crisis) or a bailout fatigue in (the northern European countries),” he said, pointing to the rise in anti-euro or anti-EU forces that are already complicating politics in many of the key EU members.

The entire policy system in the eurozone today “has a deflationary bias,” and the problem with the eurozone policymakers is their “refusal to change tack” because of “the sanctity” of the euro project, he said.

Britain is also in an economic crisis with the huge budget deficits, “but at least we own it,” he said. “It’s our mess. We can tighten policy at what we think to be the right pace. Nobody’s forcing fiscal overkill down our throat. This means that the psychology of the crisis is completely different, and so is the effect.”