You are here: Home Knowledge Base Designing a Stable Euroland: The Corporate Perspective Proposals The Euro system at its current state: A threat to greater unity and prosperity
Symposium 2013

Proposal - The Euro system at its current state: A threat to greater unity and prosperity

The Challenge

It is obvious by now that the German economy is not immune to the on-going crisis: A severe drop in exports to the rest of the euro zone is hurting manufacturing. At the same time a combination of lar ...

It is obvious by now that the German economy is not immune to the on-going crisis: A severe drop in exports to the rest of the euro zone is hurting manufacturing. At the same time a combination of large-scale immigration and of capital inflows makes Germany look like a beneficiary of the gloom elsewhere. While the negative economic effects have so far been largely offset by rising domestic demand and exports to countries outside Europe, the longer-term consequences of the crisis may be severe: Economically, Germany will have difficulties to strive in a Europe in perma-crisis. Politically, Germany faces adverse reactions for the austerity it imposes on weaker partner countries.

The intentional breaking of rules und agreements, e.g. the permanent violation of the fundamental convergence criteria of the Stability & Growth Pact, by the European governments since the introduction of the Euro-currency has already weakened the economy of the member states. Furthermore the ongoing mismanagement of the resulting financial crisis will certainly result in more inflation in the medium term and shrinking wealth of the citizens in all parts of the Eurozone.

The Euro which was intended as a tool for closer political integration of the European Union has turned out to create the opposite with additional tensions and increasing conflicts between the European countries. For years a large part of the European population supported the massive attempts to rescue the Euro as an obvious and integral component of the European community spirit. Due to the sometimes conceptless management of the crisis more and more citizens lose trust in the European government system to be able to solve the problems coming up.
What are the options now to save unity and prosperity in Europe?

Most politicians vote for the establishment of a central European fiscal and economic government. This probably is not a realistic solution since the large European countries, especially France, are not yet mature for the foreseeable future to give up their financial autonomy for a government of "The United States of Europe". An Organization to monitor the compliance of the member states with the Maastricht criteria and to sanction countries who do not comply with the rules is promoted by politicians, but has no realistic chance to be implemented.

It is necessary to come back to the "no bailout"-clause and to sanctions against any member not qualifying for the membership of the currency union. That means that there must be the possibility to expel or let a member-state leave the “Euro-Club” after continuous non-compliance. Taking into account that even prominent and large countries like France are violating the rules, this of course could lead to the dissolvement of the whole currency union. But without the option to adjust the membership of the Eurozone the current problems will not be solved but delayed by granting state guaranties and printing fresh money to just win some time for the governments to survive the next election.

Even if still denied by the most politicians, the “transfer union” already exists. The present fiscal policy of the EZB and possibly the establishment of Eurobonds will lead to much higher inflation rates all over Europe. This would be the most unsocial policy to “solve” our problems.

In the long-term the wealth of all membership countries would be leveled off on a lower standard than presently in Germany. In consequence, the whole Eurozone would fall back behind other industrialized regions of the world. Furthermore, this possible nightmare-scenario combined with the current hard measures of the necessary austerity policy could lead to the serious threat of social unrest in Europe.

To avoid these extreme consequences, we need a strong leadership on top of the European organizations and a clear commitment on the Maastricht-criteria combined with the option to execute sanctions which may go as far as exclusion from the “Euro-Club”. Only with consequent and comprehensible management of the crisis the EU can sustainably assure the future of the currency-union, greater unity and prosperity for the European people. Otherwise Europe will economically and politically fall back behind other dynamic regions of the world and enter a longer phase of degeneration.

    Related Proposals

    Proposal
    Symposium 2013

    Building on our strengths – Seizing Europe's growth opportunities

    Every time a brighter economic signal emanates from anywhere in Europe, politicians and scientists strike up yet another discussion about whether the crisis is at last drawing to a close. After a good ...

    Every time a brighter economic signal emanates from anywhere in Europe, politicians and scientists strike up yet another discussion about whether the crisis is at last drawing to a close. After a good three years of riding the roller coaster, that is understandable. Yet debating whether the beginning of a happy end has finally materialized puts us on the wrong foot. Europe does not have the luxury of taking a breather. Notions of any kind of stability are deceptive. Under severe pressure to manage the crisis, the EU spent the first half, if you will, putting together important reform packages

    Polity, Academia, Business, Civil Society