Half-way house

The EU needs further union to promote compliance and save it from itself

The EU needs further union to promote compliance and save it from itself

The European Stability Mechanism ESM will become active today,three days after Greek Prime Minister Antonis Samaras admitted that his country would go bankrupt in November without further aid. The ESM will act as the permanent financial crisis manager of the European Union,superseding the European Financial Stability Facility,the eurozones temporary rescue fund. It institutionalises the bailout as a routine feature of the economy of the region,but this could be a mistake,striking at the very idea of the EU. The Union was built on a set of conditionalities. Compliance was essential for membership and it was understood that members who slipped up would be shipped out. Prior to union,these conditionalities were aggressively sold over several years by the backers of the project to generate a culture of commitment.

The faltering of the PIIGS nations suggests that the need for commitment is not being sold adequately any more. Besides,it exposes a North-South divide within the eurozone. Its not an economic divide,since Italy and Spain are among the powerhouses of the region,but some nations seem to be less willing than others to honour commonly held expectations. The EU is vulnerable to such problems because its a halfway house. It stopped short at monetary union without carrying the process forward to fiscal union. It has a common currency,is represented at the WTO as a single entity,but each of its member states has its own finance ministry. This was done to preserve national sovereignty,but theres really no contradiction. If nations allow regional autonomy,so can the EU become a fiscal union that allows national autonomy on certain economic sectors or issues.

Such further union could promote compliance and save the EU from itself. The alternative is to follow the present route of bailouts that encourage countries to live miserably on the never-never,having tightened their belts,the modern version of the hair-shirt of old Europe. Its a hold-off that looks permanent but,someday,the debts will be called in. For fear of taking another resolute step forward,Europe is setting itself up for never-ending misery.