The European Commission on how (not) to change the Eurozone

Previous posts in this series on central banking: ideas of Willem Buiter, Richard Werner, Thomas Mayer, excerpts from a recent paper by Mike Konczal and Josh Mason, Edward Harris and ideas from the German Handelsblatt shadow council. Today: the European Commission.

Why? A lot of people want to change (European) monetary policy and central banking. This includes the members of the European Commission. They want 2 things:

• A larger Eurozone
• Some kind of ‘transfer’ union which somehow transfers either investments or income or financial funds to members in need (but also restricts discretionary powers of members to increase or decrease government spending).

The first point is delusional. The idea behind the second point: the Eurozone is a ‘free flow of funds’ zone. As freely flowing funds can, thanks to ‘markets’, stop suddenly or reverse course, a ‘free flow of funds’ zone is prone to financial havoc which brings entire economies to the ground. Remember above 25% unemployment in Spain and Greece, not even counting ‘broad’ unemployment. According to the EC we need better institutions to counter this. Bill Mitchell about this (excerpt):

This is the second part of my two-part series analysing the latest offering from the European Commission on Eurozone ‘reform’. Today, I consider the two ‘concrete’ proposals to emerge from last week’s – Completing Europe’s Economic and Monetary Union – policy package. The two ‘concrete’ proposals are: Creation of a European Monetary Fund to absorb the intergovernmental European Stability Fund and the integration of the Fiscal Compact into the Treaty on the Functioning of the European Union. Neither are reforms worth considering. In general, they reflect a desire by the European Commission to further extend its control and to make it harder for Member States to act unilaterally. Given these are the only two actual action plans that the European Commission has proposed in its latest salvo to extend the monetary union, one has to conclude that there is little chance that anything progressive will come out of this process. And, that should inform the Europhile Left that they are on the wrong horse. They seem to have a blind faith that pressure will eventually force the European Commission to come up with policies and structures that would deliver progressive outcomes. That faith is delusional. It would be better for the Europhile Left to come to terms with that reality and get behind progressive movements that seek to restore national (currency) sovereignty, which will allow the current Member States to restore full employment and start rebuilding some prosperity.