The European Debt Crisis
EU: Fiscal Union or Breakup
Creating a monetary union without a fiscal union was certainly getting off on the wrong foot. We have recently seen how the UK’s left the EU in the lurch after a surprising outcome of the referendum (arguably against their own interests). But there’s no use crying over spilled milk. At this point, rather than focusing on blaming one another and letting the sparks fly, we should consider the most urgent measures to be taken.
The crux of the matter is that there is no system in place to prevent the European debt crisis from breaking out again. As things look at the moment, it is highly likely that in the next few years we fall into the same debt trap, with all the suffering, sacrifice and cutbacks that entails. Amazingly, such tax harmonisation is still up in the air.
One thing is for sure: the euro area requires a fiscal union to match its monetary union. There must be an entity with the ability to implement fiscal policy throughout the European Union, raising taxes and setting laws when necessary. That would be the way of preventing excessive borrowing and spending.
As one may expect, in some member states of the EU it would be a very unpopular step to take, because it would mean to hand over more national sovereignty to a supranational entity. As we have seen, it is common among the extreme right to blame the EU —and, of course, immigrants— for the nation’s ills, even when it has little or no connection at all. Nevertheless, It is an easy way to capture the gut reaction votes from an often uninformed society.
On the other hand, further redistributive polices are required to ensure social justice. As a matter of fact, these are precisely the sort of measures which can project a more sympathetic image of the European institutions. As I see it, MEPs should take this consideration on board and start racking their brains to design a sound fiscal union if they don’t want to face disaster. We cannot push the issue onto the back burner any longer.
While the future of the Union is at stake, the lack of leadership is a troubling indicator of the big gap between institutions and citizens. Whether the EU will do what it takes to create a centralized fiscal policy or the monetary union will break up, remains to be seen.