I have long wondered how there can possibly be monetary union without fiscal union.
That is, how can a number of countries share the same currency, yet have economic policies that are not strongly aligned? A tight budget in one country, a lax spending regime in another, and the money market has mixed – misaligned – signals on the value of the currency. One set of policies would drag the other down – or up, depending on the relative weight of the national economies.
Of course, it’s all very well to say this after the event. (What’s a blog for, if not to flag the thought ahead of time?)
Clearly, union of economic policies in the Euro zone is a bridge too far - at present at least. Thus European politicians (and econocrats) are by necessity making the case that there can be a way to salvage a common currency – no doubt through the gradualism that seems to have become a feature of the evolution of the EU.
The European Union (and predecessors) has always been the most advanced polity in the world. Yet I never expected it to be carried this far this quickly. That gradualism that did it, though, has led to the current mess which will tip many economies into recession.
But if they can sort it out, they are showing the way forward for the whole planet. Unless, of course, the world ends up in blocs à la 1984. Whether that’s a bad thing, we still can’t say with certainty, but surely such integration means a more stable, rational world – either way.