I thought central bankers were supposed to stay out of politics?
The comments of Executive Board Member
José Manuel González-Páramo at Oxford University yesterday.
"The key theme that has run through my remarks today is that, from every perspective, much closer economic and financial union is essential for the euro area. (
He's not kidding.)
...
We have already taken important steps in this direction. Europe is ahead of others in addressing its imbalances (
This is actually true). The challenge looking forward is to complete the process towards closer union and not settle for the ‘quick fix’...And this is ultimately unavoidable,
given the state of political union between countries that monetary union de facto creates. It is now a time for politicians to be bold and courageous, to recognise these trends, and to complete as soon as possible the great project begun 60 years ago towards ‘ever closer union’."
The gist of Gonzalez-Paramo's remarks are the same as that of Wolfgang Schauble to the New York Times. The crisis, is being used to help Europe complete a quantum leap in fiscal union. Those familiar with the history of the EU know that in the late 1980s, the UK insisted on the principle of subsidarity, that "the centre should perform only those tasks which cannot be performed effectively at the national level". The issue now is that the worse the crisis is, the further tasks fall into just such category "cannot be performed effectively at the national level." Hence the crisis itself, by attacking national sovereignty, is aiding the EU center, whose own core institutions (the ECB, the European Commission, and theoretical eurobonds) are immune from attack.
What I could not get from his remarks was how bad the EU authorities are willing to allow things to get in the short-to-medium term (one to two years) until they complete their Treaty work and introduce euro-bonds. Based on the logic of his thinking, it is conceivable that Spain, Italy and France could see complete default, yet this would not be seen in a negative light for it would put these countries at the mercy of the German-dominated European Commission to be financed through euro-bonds.
