Friday 17 November 2017

Fiscal folly

• Recently, many political commentators repeated the mantra that only greater fiscal integration could save the euro and that without the euro the whole European project would collapse -- and if the whole European project collapsed, there might be a war in Europe.

I think quite the opposite is true -- the European integration begins to resemble the Soviet model insofar as the fact that not the collapse of the eurozone might endanger Europe's peace, but its excessive centralisation. German leadership might lead to growing resentments in peripheral countries.

Under the Soviet occupation, Poles, Czechs and Hungarians thought that their misery was caused by goods being exported to the Soviet Union for peanuts and the Russians thought that they were poor because they had to subsidise countries like Poland, Hungary and Czechoslovakia. I'm sure that the results would be similar in the EU if Europe went for tighter fiscal integration.

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