But the two sides remain deeply divided. Macron, in long-standing French tradition, insists that the monetary union suffers from too little centralization. The eurozone, he argues, needs its own finance minister and its own parliament. It needs a budget in the hundreds of billions of euros to underwrite investment projects and augment spending in countries with high unemployment.
Merkel, on the other hand, views the monetary union’s problem as one of too much centralization and too little national responsibility. She worries that a large eurozone budget wouldn’t be spent responsibly. While not opposed to a eurozone finance minister, she does not envision that official possessing expansive powers. [...]
The solution lies in bulletproofing the banks by strictly applying the demanding capital standards of Basel III and limiting concentrated holdings of government bonds. The paradox here is that European regulators, including German regulators, have in fact been arguing for looser application of those regulations in negotiations with the United States. In doing so, they have been arguing against their own best interests. [...]
The EMF could then take the place of the ECB and the European Commission in negotiating the terms of financing programs with governments. The final decision of whether to extend an emergency loan would no longer fall to heads of state in all-night talks. Rather, it would be taken by a board made up of eurozone representatives, including from civil society, nominated by the European Council and confirmed by the European Parliament, giving the process a legitimacy it currently lacks.
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