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Thursday, January 05, 2017

EU Out of Ideas To Sustain Itself

No major initiatives are in the pipeline to resolve once and for all the incompatibility at the heart of the euro project. Governments are terrified of scaring financial markets -- and voters. Finance minister meetings are an unedifying succession of stalemates. Southern powers want more pooled sovereignty, economic and fiscal strength in numbers, to insulate their vulnerable economies. Northerners demur, until their balance sheet risk is reduced.
As long as these two schools of thought exist, the cycle of debt overhang and liability risk will continue.
The European Central Bank president, Mario Draghi, has drafted a roadmap to deepen economic and monetary union. But there are no unified ideas on how to take the 19-nation euro bloc towards fiscal and financial union, and all too quickly it has started to look like the kind of integration that demagogues mock and the people have rejected.
Europe may remain a haven of relative prosperity, peace and democracy, but the sense of perma-crisis is taking its toll on core values. Perhaps even more than Brexit, the agreement between Brussels and Ankara last year to send back to Turkey refugees who had arrived in Greece has create a deep unease inside European institutions.
But the EU's inconclusive results cannot be blamed on a lack of big ideas, argues Guntram Wolff, director of the Bruegel thinktank. Whether it is stagnant productivity, the migration crisis or corporate tax avoidance, "there is no one switch you can flick", but instead, numerous micro policies are needed to solve Europe's problems, many of which are in the control of national governments.

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