These are interesting times. Earlier this week the financial markets celebrated the creation of a European bailout fund and hoped the worst was over. I thought the bailout fund would bring some temporary stability, but I didn’t think that stability would last for only a few days. As I write I see the fear returning to the financial markets. The story that has caught many people’s attention today is the story about how France threatened to quit the Euro this past weekend when European negotiations last weekend were not going well.
The story that I believe is far more important and yet is hardly getting any attention is how there is now talk that fiscal union within Europe is necessary. For instance, the head of the Bank of England recently proclaimed that fiscal union is necessary for the Euro to survive.
“I do not want to comment on a particular measure by a particular country, but I do want to suggest that within the Euro Area it’s become very clear that there is a need for a fiscal union to make the Monetary Union work”
In addition, there is a story on a Portuguese news website about how the European Council may soon vote on a proposal by the European Commission which would take away European countries’ sovereignty over the creation of their budgets. The story also notes how the current crisis has defeated any opposition to the European Commission’s proposal. An English translation of the story can be found at this link.
Fiscal union is not quite the same as political union, but it’s a major step towards it. Under fiscal union the members of the EU would be able to influence each other’s budgetary and taxation policy. The determination of budgetary and taxation policy is not only an economic decision but a political decision. Therefore, the creation of a fiscal union would give EU members some political sway in the domestic politics of individual European countries. The next step after fiscal union would probably be political union.
It’s too early to say what is going to happen, but there is the possibility that the current situation may be the catalyst that pushes the EU closer to political union through the creation of a fiscal union. Political union is something that probably needs to happen if you believe that the EU is going to be a future superpower (whether I believe the EU is going to be a superpower is a different matter).
I am often cautious about saying whether a current event is helping to bring us closer to the end times. However, my sense right now is that what’s going on in Europe is fairly important and something we may look back on in a few years as an event that influenced the fate of Europe.