Tomorrow, the European Union meets to address the economic tumult in its various states and, in addition to what a successful resolution to these challenges means to US markets, may provide a blueprint for the US in dealing with its own economy. While dealing with the sovereignty of each individual state gives an impression of disunity, and, perhaps, an enigmatic quality to the Union, they are still bound to a common currency and the stability, thus the support, of that currency.
The first matter that must be laid to rest is the possible expulsion of any members. If any current members are marginalized or allowed to leave the Union, it is the beginning of the end of the EU. The thought will forever linger that, when faced with difficulties, the EU will disassociate itself from danger and the members will live under a Sword of Damocles’ dangled by the strongest states. This will render the word of the EU states meaningless and the currency as well. If this is not done, any other action they take will be irrelevant.
The central issue is, of course, debt and the issuance of debt by member states with the EU as guarantor. This is remarkably similar to a US state, say California, teetering on the edge of bankruptcy and the federal government having to vouchsafe the debt. It simply must be done and, as with the irrevocable nature of membership, will call into question the honor of the Union if not dealt with entirely.
Being forced by the insolvent states into this position, what would the prosperous states of the Union gain by continuing this association? The European Union came into being from the thought that many nations, with common financial interests, institutions, and practices, could, under a common currency, act as a single large state, again, similar to the United States. It functioned well, for the most part, until the recession so the assumption should be made the association will benefit the members after the recession ends, at which time the proper reimbursements should be made, but a larger benefit to the fiscally fit nations is their ability, for the first time in the history of the Union, to bring the less able forward to a more progressive economy and a more stable society. This is an opportunity, if handled correctly, to truly unite under a common vision.
Given the most prosperous nations are highly Keynesian in their approach to economic dislocation, I would hope the solutions they arrive at in regard to the ongoing viability of the endangered states would be of that philosophy. That is where the largest benefit to the United States lies: the putting to bed of the endless debate on the proper course of OUR recovery. This notion that the US exists in a separate reality that does not respond in a manner consistent with other economies around the world must be excoriated so that the necessary consensus of opinion may finally be arrived at by the government of this country.
Sadly, we must look outside our borders for leadership…
The first matter that must be laid to rest is the possible expulsion of any members. If any current members are marginalized or allowed to leave the Union, it is the beginning of the end of the EU. The thought will forever linger that, when faced with difficulties, the EU will disassociate itself from danger and the members will live under a Sword of Damocles’ dangled by the strongest states. This will render the word of the EU states meaningless and the currency as well. If this is not done, any other action they take will be irrelevant.
The central issue is, of course, debt and the issuance of debt by member states with the EU as guarantor. This is remarkably similar to a US state, say California, teetering on the edge of bankruptcy and the federal government having to vouchsafe the debt. It simply must be done and, as with the irrevocable nature of membership, will call into question the honor of the Union if not dealt with entirely.
Being forced by the insolvent states into this position, what would the prosperous states of the Union gain by continuing this association? The European Union came into being from the thought that many nations, with common financial interests, institutions, and practices, could, under a common currency, act as a single large state, again, similar to the United States. It functioned well, for the most part, until the recession so the assumption should be made the association will benefit the members after the recession ends, at which time the proper reimbursements should be made, but a larger benefit to the fiscally fit nations is their ability, for the first time in the history of the Union, to bring the less able forward to a more progressive economy and a more stable society. This is an opportunity, if handled correctly, to truly unite under a common vision.
Given the most prosperous nations are highly Keynesian in their approach to economic dislocation, I would hope the solutions they arrive at in regard to the ongoing viability of the endangered states would be of that philosophy. That is where the largest benefit to the United States lies: the putting to bed of the endless debate on the proper course of OUR recovery. This notion that the US exists in a separate reality that does not respond in a manner consistent with other economies around the world must be excoriated so that the necessary consensus of opinion may finally be arrived at by the government of this country.
Sadly, we must look outside our borders for leadership…
