Excellent piece by Peter Sutherland in today’s FT:
An honourable tradition of the European Union is that of turning a crisis into an opportunity…
The past three months have provided painful lessons to the leaders of the eurozone about the design flaws of the single European currency…
Without the single currency, Europe would be an economic wasteland. The cost of not having the euro would have been far greater over the past two years than the cost of having it has been over the past three months. Competitive devaluations of national currencies after the financial crisis of 2008 would have led to economic chaos incomparably worse than the turbulence we are now experiencing. The eurozone’s leaders recognise this. The task that confronts them is to ensure that the eurozone functions in such a way that the risk of disintegration is minimised and its potential advantages are exploited to the utmost…
The original system of governance for the European single currency was intellectually and politically schizophrenic. On the one hand, it represented the culmination of 40 years of integration, based on the obvious inadequacy of national procedures to confront continental and global challenges. On the other hand, it was concerned with preserving absolute national sovereignty in fiscal, budgetary and macroeconomic matters…
Their common membership of the single European currency entails a measure of economic sovereignty-sharing between, for example, Germany and Greece. This will not disappear because there are no political structures to manage and reflect their shared sovereignty…
Recent experience points to a more binding surveillance of national economic, not merely budgetary, policies. A natural counterpart would be enhanced macroeconomic co-ordination within the eurozone. Even within the single European market, national economic policies have substantial repercussions for that country’s neighbours. That the eurozone has been so reluctant to set up mechanisms for managing this interdependence is a tribute to the fetish of national sovereignty rather than a reflection of reality…
Germany has every interest in playing its traditional central role in that process, not merely as a good neighbour in Europe, but as a matter of pressing national interest.
A useful antidote to the euro panic and hostility.