You say integration, I say delegation

The question on everyone’s mind right now is the issue of how the EU can better monitor and regulate the fiscal health of its member states, given the historical and cultural back droppings of this diverse continent.  Most of the ideas point in the path of more fiscal and political integration.  Some are nothing but populist and reactionary rants. But fantasy or not, the intent is there.

So given such an astounding lack of creativity, it’s interesting to see ideas that suggest smarter, and not more integration.  It might require a large degree of tinkering to make it work, but this makes more sense to me than most rhetoric I come across.

In referring to proposals that have member states monitoring each other’s budgetary decisions:

It would clearly be anathema to the German government to have its spending and tax policies approved by France, let alone by Greece and Portugal. The problem for the EMU leadership is therefore to find a way to prevent excessive deficits while leaving member states free to shape their own spending and tax policies.

Instead of imposing such intrusive measures, a united continent of Europe can conceivably impose stricter constitutional measures within its member states – certainly ones that are part of the currency zone, that place limits on state deficits. The United States is held up as such am example.

Although the 50 states share a currency and each sets its own spending and tax policies, state deficits remain very low. Even California has a deficit of only about 1 percent of the state’s GDP and total general obligation debt of less than 4 percent of state GDP. The basic reason for these small deficits is that each state’s constitution prohibits borrowing for operating purposes. States can issue debt to finance infrastructure but not salaries, services, transfer payments or other operating expenses.

With a similar set up in principal, European states can possibly retain independence over its budgetary and tax decisions, while having a deficit ceiling that it cannot break regardless of which way the political wind blows.  But the issue with Europe right now is to overcome the (rightly so) fears of sovereign power erosion. Several national elections are taking place across the continent over the summer, and ceding more power to Brussels will win nobody votes this time around.

Smart negotiations over state sovereignty for more economic stability, or handing over more power to Brussels in matters that they have little business in that will end up where we are any way.  One of the many questions for EU leaders to ponder.

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