Having failed in Britain, George Osborne now seems to want to dictate economic policy in the eurozone. He goes on about the “relentless logic” of the need for the eurozone to become a fiscal union, and he drops heavy hints that he believes they should start the revolution without Greece.
The spectacle of a rightwing Conservative chancellor advocating European fiscal union is ironic in the extreme – and the extreme right of the Conservative party must have very sore eyes. As for the potential conflict between the eurozone’s ideas of financial and banking regulation and those that suit the City of London, we have seen nothing yet.
But it is an ill wind that blows no chancellor any good, and the travails of the eurozone have given Osborne the perfect cover for a major U-turn in economic policy.
Aside from the torrent of news about continuing banking crises around Europe, even if the banking system is fixed – a big if – the tenor of Germany’s plans for the economic policy of the eurozone is deeply worrying.
If one looks around the world, one finds that most of Europe, including the UK, is in a depression; that China and other emerging economies are slowing down; and that the US, which seemed at one stage to have a more stimulatory economic policy than the rest, is in fact “recovering” far more slowly than had been hoped.
No wonder President Obama and his entourage are taking such a close interest in events in the eurozone. Economic trends, and a lack of leadership, are reviving all too vivid memories of the 1930s.
We know how honourable were the motives of Chancellor Kohl and President Mitterrand in pushing for monetary union after the reunification of Germany in 1990. But, as the former Bank of England and United Nations economist Mica Panic concludes in a masterly study of globalisation and the eurozone: “The main problem with [the eurozone] in its present form is that, whatever the original intention, it has turned out in practice to be nothing less than an attempt, in the macroeconomic management and the welfare state in particular, to put the clock back to the 1930s!” (Globalisation – A Threat to International Cooperation and Peace?, 2011.)
It is abundantly clear that everyone is dissatisfied with the eurozone in its present form. Unfortunately, the plethora of putative remedies flowing out of the body politic, whether they involve eurobonds, banking unions or medium-term plans for a quasi-fiscal union, do not address the central economic issue of our time: how to emerge from the depression that is with us here and now.
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