During the G-20 meeting in Mexico in June 2012, the E.U.’s
financial mess was front and center. Francois Hollande wanted the European
Central Bank to issue euro bonds and be able to loan directly to banks and to the
European bailout funds. In general, he wanted the E.U.’s bank to operate more
like the United States’ Federal Reserve—that is, as a lender of last resort
(though the Fed could not issue debt to guarantee state debt). In response, Ms.
Merkel contended that those proposals must come after more state sovereignty is
shifted to the federal level. Shared debt can work only if there is shared
decision-making over budgets, taxes and pensions, she said. As Joschka Fischer,
a former German foreign minister and Green party stalwart, said, “You can’t
mutualize the debt without mutualizing sovereignty; you can’t have the
financial benefits of a state without having one.” And yet, the E.U. already
had substantial (but not sufficient) governmental sovereignty.
The full essay is at Essays on the E.U. Political Economy, available at Amazon.
