Sarkozy (France) and Merkel (Germany) are proposing that the Euro Area/Eurozone create a new “Collective Government” that ostensibly would expand the current economic and monetary agreements within the Eurozone to perhaps overlap even more into the governance of individual nations by the collective, central union. After traveling extensively in Europe since the 1970’s and watching the European Economic Community/ Common Market morph into the Euro Area/Eurozone that we know today, as a 17 nation economic/monetary “union” that generates a combined GDP in 2010 of US$16.3 Trillion, I seriously doubt that this proposal will thrill the citizens of these nations nor those waiting on the sidelines to join.
Italians yearn for the return of the Lira (take a calculator with you if they do); those in the union who do not eat horse meat do not like the fact that they have to get passports for their “leisure” horses; and the UK, who has not joined yet, will have a lot of their people enraged if the Prime Minister tries to complete the UK’s entry into the Union with this consolidation of power by a more centralized Eurozone. Many of the Brits today don’t want to enter into the Eurozone and lose any autonomy to that body.
So what is the goal? The only one that is apparent is more centralization under the Eurozone banner that could include:
- Centralized Salary Management
- Centralized Pension Management, amounts and work requirements
- Centralized Taxation (more revenue would have to go into the central Eurozone to fund yet another bureaucracy)
- Centralized Defense Spending
- Centralized High Court type of Judicial Functions
- Centralized output planning
- All other national government functions may eventually be incorporated into the Central Eurozone government.
Ultimately the Eurozone may change into a version of the United States where the individual nations are like our States. This is a huge cultural change and one that would ignore nationalism and national pride.
Since most of the Eurozone nations are way left of center, it would not be difficult to envision a consolidated Socialist Eurozone. The problem will be that the more affluent and better managed members will resent having to subsidise the more undisciplined members. It would be like all the States having to subsidize California. OOPS, they do now! So the end result could be a much weakened conglomerate of nations rather than a stabilized Europe. What about Sharia Law and its encroachment on the individual European nations’ judicial systems. If Sharia was adopted by Brussels, (the “capital” of the Eurozone), how would Italy, France or the Scandinavian countries react?
The problem with the idea of morphing into a Collective Government is that it is not a planned transition. In the case of the United States, we fought for our independence; we then met for years to develop the Constitution; then the States spent years developing or modifying their own Constitution. In the case of Europe, they are changing as they go rather than come up with a concrete agreement for the end game then sit down and work out ALL of the details.
The combined GDP of the Eurozone is slightly higher than the US and is also suffering from sluggish growth. The Eurozone’s second quarter growth was only 0.2% or 0.8% annually. The real bad news is that Germany has had a very sound economy since the Depression of 2008 but is now flat as is France. If the two largest economic engines are flat, which nation will pick up the slack? Luxembourg, Cyprus, or Malta? After you get past France, Germany, Italy, Spain, Netherlands, Portugal, and Greece, the rest of the Eurozone is pretty small. Within the top 7 nations, 3 are basically in receivership by the European Central Bank. The United States cannot afford for the Eurozone to become any less stable economically than they are today. Also, the Eurozone nations should definitely include the UK in any of their discussions for changing their governance or risk the UK permanently shunning the Eurozone.
The Ultimate Question:
The real question for the US and the Eurozone is whether they both are going to continue to move their economies and nations toward more and more socialism. If they are, then the form of government will not matter in the long run as they will fail. If one, say the United States, reverts back to its capitalistic roots and stabilizes by reducing their GDP:Debt ratio, the Eurozone could still drag down the global economy and the that of the US. It does not seem like any of the Western Leaders want to discuss the elephant in the room which is socialism. It is an unsustainable economic model and has always resulted in failure.
This is time to step back and reassess the Direction of the Western World. China, Russia, and some of the South American nations are growing by installing capitalistic models. Maybe we should follow our own example and go back to the basics, capitalism…