Now that the Greece crisis is over*, top European leaders are already looking ahead and trying to figure out what they can do to prevent another one.The first order of business is to create a political/regulatory scheme that binds countries in ways beyond merely deficit spending.
See, when the euro was created, the naive belief was that as long as no member was allowed to run up enormous deficits, there would never be a need for a bailout. Of course, there are all kinds of ways to get in trouble besides merely deficit spending, and what looks like an OK situation at one point, can easily turn into a sovereign debt crisis a moment later.
So, according to FT, Germany and France are kean to set up a new euro-wide IMF, and adopt fresh euro-wide economic policies.
The first details of the plan, including support for an EMF modelled on the International Monetary Fund, were revealed at the weekend by Wolfgang Schäuble, the German finance minister.
“I am in favour of stronger co-ordination of economic policies in the EU and in the eurozone,” Mr Schäuble told newspaper Welt am Sonntag.
The FT suggests this would be the biggest overhaul since the currency’s launch in 1999.
The question is, when will they bite the bullet and do the obvious: A shared national treasury of some sort. This seems inevitable; the union will need some kind of system to bail out weak players at the expense of the rich, from time to time, without all the sturm und drang of politcs. As Soros has suggested, the stabilizers will need to be automatic (like we have in the US, to some extent). For the euro to make sense long-term that’s what needs to happen. Whether politicians have the courage to get there is another story.