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Home > Blogs > Anthony Harrington > A “Frankendeutsche” European government—A monster by any name?

A “Frankendeutsche” European government—A monster by any name?

EU Government | A “Frankendeutsche” European government—A monster by any name? Anthony Harrington

With every market commentator now well drilled in the idea that the fundamental flaw in the European Union is that it has a monetary union but no fiscal union, it was only a matter of time before European politicians started to (re)float the idea of a pan-European government. “And not for the first time”, some might say, adding that it is no more “doable” now than it was at the time of the Maastricht Treaty.

The problem the idea has always broken itself against is the age old one of the centre versus the regions. There appears to be a very finite limit to the amount of time you can administer a huge, diversified entity successfully from some central point, before you drop all the balls and the thing implodes. Which brings in the eternal debate about how to reconcile regional (read “national”) autonomy with central control.

Brussels has certainly not yet managed to come up with anything resembling a coherent solution to that conundrum, so it is not clear that pointing to a logical flaw (the absence of fiscal union) is enough, of itself to generate a solution to the centre versus regions dilemma.  

This kind of talk, of course, is enough to have Eurosceptics climbing up on chairs and taking their blunderbusses down from the tops of their wardrobes. However, perhaps buoyed up by the thought that he is already France’s most unpopular politician, (so, hey, what more damage could be done?) French President Nicholas Sarkozy has decided to give the topic a whirl. He is reported to be pressing for eurozone leaders to get together regularly and to create a secretariat to give life to their decisions—a European economic government in all but name.

President Sarkozy is not averse to shooting from the hip at moving targets, often to the consternation of his aides. However, in publicly espousing the idea of a European economic government, he appears to be singing from the official French hymn sheet. French Economy Minister Christine Lagarde was reported recently as saying that euro zone governments need a formal structure capable of reinforcing moves towards closer economic cooperation—quite bare-faced code for a European economic government.

While putting pan-European economic policy making on a more formal footing has been a French fancy for a few years, the Germans, ever mindful of the fact that they could end up footing a large bill for a French frolic, have hitherto not been so enthusiastic. They already have the most competitive export engine in Europe so why tinker with a good thing? Actually, the “why” part has now been lit up in mile high lights. Europe is a bust if something drastic is not done, is the current refrain.

The half way house being promoted by European Council President Herman Von Rompuy, the man who beat former Labour Prime Minister Tony Blair to the job, is reportedly a souped-up forum comprising the eurozone heads of states and governments. No one has any idea how to formulate the legal status of such a beast, but the idea is that it should constitute something along the lines of the French idea of an economic government.

The very least such an entity would have to have is a binding consensus on tough fiscal rules with some real teeth to bite the ankles of those who break ranks. The European Commission wants the power to scrutinise and veto national budgets before they go to parliament. In the highly unlikely event that that kind of power was granted by all 17 member states, it would constitute quite a sharp set of “teeth”.

However, the devil, with this kind of high flying proposal, is very much in the detail, and while there is more movement in the direction of some kind of pan European entity right now, on the part of the French and the Germans, than there has been for some time, it will take a few more lightening strikes yet, I fancy, to create the Frankendeutsch monster.

Further reading on EU government and Eurosceptics

Tags: economic government , EU , European Monetary Union , regulation , sovereign debt
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