Friday, June 3, 2011

Trichet Proposes a More Federal Europe

Jean-Claude Trichet wants a more federal Europe to save the euro. In fact, what he's proposing has been a persistent aim of French governments: greater council control of the European Central Bank and a dual mandate for the bank, something closer to the mandate of the U.S. Federal Reserve. This has always made eminent good sense but has nevertheless been opposed by Germany, historically skittish about "debauching the currency." We'll see how this latest proposal fares in a time of crisis, when half-measures seem not to be working.

Les évènements récents donnent pourtant raison à la France, vingt ans plus tard. En octobre 1990, François Mitterrand, prophétique, avait prévenu qu’une monnaie unique sans gouvernement européen ne survivrait pas longtemps. On y est. Le problème est que les gouvernements, notamment allemand, résistent à une telle communautarisation de la politique économique et budgétaire de peur d’être un jour contraints à leur tour… Comme l’a compris Jean-Claude Trichet, la zone euro ne peut plus rester ainsi au milieu du gué : l’intergouvernementalisme actuel condamne à terme la monnaie unique.


Michael said...

So, am I wrong to think that the only ways out of the Euro mess are either, 1) a stronger, federal government/ bank in the EU, or 2) the dissolution of the Euro and a return to individual currencies? I know I'm being simplistic, but is there a third way (I guess stay the course and hope for the best...)?

FrédéricLN said...

There is no third way. We (the center, "les démocrates") explain that since decades. But curiously, we are perceived by media and public opinion as defenders of the European way as it is — that we are not at all. We want it to be changed. Jean-Claude Trichet, not a far leftist, is here on the same line than Jean-Luc Mélenchon, not a far rightist (thanks Art for the link you posted yesterday to his blog). Perhaps the center will be listened to some day.

There is no third way — but "a stronger, federal government/ bank in the EU" can be achieved through stronger collective institutions. The difference is thin, but sensitive in Europe: you don't need a "Washington", here "Brussels", to rule over the individual States using the Euro. You need the circle or "Board" of the Heads of States to enforce order and discipline within their ranks about the way the common money/currency is used.

Greece and France fooled their partners so many times that enforcing this discipline will not at all be easy.

randcoop said...

I don't know about the self-identified centrists, but those of us who self-identify as leftists are increasingly sceptical of Europe envisioned by people like Trichet. It's ironic that Germany is opposed on the grounds that it might compromise their control, but the countries that truly need to be afraid are the PIGS and the Eastern Europeans.

Note that Trichet has already done everything he can to force Greece, Ireland and Portugal into ever deeper recessions/depressions of higher and higher unemployment. He continues to increase interest rates, which has the effect of making it more difficult for the debtors to repay their loans. It also strengthens the euro internationally, making it far more difficult for these desperate countries to reverse their current account deficits through increased exports.

The monetary union hasn't been the boon that Trichet claims; or rather, it's only been a boon to some of the people some of the time. Were it not for the common currency, the Greeks would have devalued their currency a long time ago and they would be well on their way out of the mess without the draconian austerity they've imposed today. The great unified market that Trichet exalts is in fact a market for German exports. The broadened zone for employment has actually been a huge disappointment, and today it appears to be disappearing even more with the antagonism displayed against immigration.

Dissolution is a better solution for the people. The strong countries (Germany and, to a far lesser degree, France) will do just fine with a return to the mark and the franc. The weak countries will do much better.

Tacitus said...

Would jettisoning the Euro really resolve Greece's economic problems? Would that not cause a massive bank run and financial turmoil within Greece? I'm not arguing that the current austerity program is the best cure-all, but getting rid of the Euro does not seem to be a realistic method to resolve deep structural problems in Greece's economy.