it's the euro and its current institutional setup that is the key problem. it was rigged towards suppressing wages and fanning the flames of nationalist sentiments from the get go. moreover, to separate the member states' fiscal policy from monetary policy and make them indebted as though in foreign currency is insane. the debt crisis is a direct effect of this flawed setup. when the commercial banks fell, the member states were effectively forced into debt because they were force to save their own banks - sometimes by borrowing money from these very banks - and, of course, the markets had a hayday. only ECB's OMT in aug 2012 put a cap on this. yet, the cap on interest rates shoudla been put by the ECB from day one.
and yet, what needs to get got is that any nationalistic solution will backfire, since they will by definition be based on beggar-thy-neighbour, beggar-thy-workers and oppress-thy-minorities kinda policies. read: more of the same.
moreover, not every country can accumulate current account surpluses. and it is a pure folly to think that the eurozone as a whole can do so! pursuing this strategy means, in plain english, that the eurozone unilaterally and constantly benefits from world trade at the expense of the others. The FED and the US treasury already fired one shot over the bow last autumn. also, in eurozone trade, one's suprlus is another's deficit. so the socalled progligacy of the mediterranean countries kinda saved the "sick man of the euro". the eurozone would collapse if each and every country went on and made hartz reform type attacks on labour and the like austerity measures. it's not enough to build ***; it must be sold, too. and wages generate demand. and demand matters.
in other words the current mess ought to be replaced by a wage-led, european investment and consumption demand based economic model, which builds onto tying productivity growth and real wages together. on top of that evening out the current divergences in competitiveness positions among national economies and current account imbalances is necessary if this mess is to be cleared. the ex german vice finance minister heiner flassbeck, for one,
has made this very clear over the years. too bad he and lafontaine got the boot in six months when they held the german FM in 1998-9.
putting it even more bluntly, only a leftish policy mix can save europe. this demands macroeconomic cooperation among european countries not cut throat competition. whether this be done with or without the euro is another question. I am in favour of any solution that ditches the folly of nationalism and puts class at the centre stage.
too bad that the austerity obsessed EPP, ALDE, SD and the assorted nationalist groups will drive europe deeper into madness. for instance, the current deflationary spin that is looming in europe is a direct consequence of the policy mix that attacks wages, plain and simple.
all this, however, does not necessarily mean that european governance is a bad idea in and of itself. it depends on the policy mix.
the irony in this? precisely the model described above was in the discussions not 15 years ago. so the short answer to the european elites' question posed in none other than the sun is:
no.
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