

Paul Krugman: An Impeccable Disaster - awk
http://www.nytimes.com/2011/09/12/opinion/an-impeccable-disaster.html?_r=1&hp

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nhaehnle
It is nice to see Krugman acknowledging the importance of monetary
sovereignty, i.e. whether a government issues its own currency or not.

The trouble with the Eurozone seems to me that to any but the most hardboiled
ideologues, it is obvious that significant stimulus is needed in the affected
countries (perhaps combined with other measures, like strengthening the tax
collection bureaucracy in some cases). The problem is how to get the stimulus
there.

The countries themselves cannot do it because the financial markets won't let
them, and the other countries hesitate to do it because of the collective
outcry over taxpayers bailing out another country.

The ECB is filling the gap for now, but it doesn't really have the political
mandate to make pseudo-fiscal decisions like buying a country's bonds.

To me, the solution seems obvious: Give the power of monetary sovereignty to
the European Parliament. Since the MPs there are elected directly by the
European people, they are the natural wielders of sovereign power when it
comes to the Euro. Giving this power to the EP is even possible without taking
any rights away from the individual countries, because right now, _no one_ has
monetary sovereign power in the Eurozone (unless you count the ECB, but again,
they don't really have the political mandate).

Unfortunately, this possibility is not even being discussed yet, and there are
significant political egos on the national level that need to be overcome
before it can be implemented.

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daliusd
The only problem with your obvious solution - Eurozone
(<http://en.wikipedia.org/wiki/File:Eurozone.svg>) is smaller than European
Union (<http://en.wikipedia.org/wiki/File:EU_Globe_No_Borders.svg>) therefore
European Parliament can't take this role.

Yes, Eurozone has problem that they have single currency but no single
political institution and your solution is theoretically correct but
practically you have two choices:

1) you would need to force Great Britain, Sweden, Norway, Denmark and maybe
some other countries (e.g. I'm not sure about Czech Republic) to use Euro. A
lot of other countries would be happy to accept Euro - especially Eastern
Europe countries. I would be happy personally :-) But those countries do not
fulfill Euro convergence criteria
(<http://en.wikipedia.org/wiki/Euro_convergence_criteria>). Accepting those
countries just as is will have big negative impact to Euro.

2) Or let non-Euro countries to decide Euro destiny. That does not sound good
either.

Therefore your obvious solution looks more like edge case solution.

~~~
nhaehnle
What about the middle road of taking the European Parliament restricted to MPs
from Euro member states? I admit that's not a very orthodox option, but the
Eurozone is a pretty unorthodox construction anyway.

~~~
daliusd
In my opinion that kind of happens now and moving solution apparatus to EP
alone will not improve situation. The main problem is that Germany, France and
Benelux countries combined has bigger weight in EP than PIGS countries.
General opinion in Germany is that Greece must bankrupt [1] and I guess that's
general opinion about PIGS. Moving decisions to EP would give opposite effect
at the moment. There is no single Europe yet.

Before some time I have tried to compare USA to EU:
<http://news.ycombinator.com/item?id=2725696>

It is quite interesting that EU and USA can be compared but different
structure of economies show why USA is in better/different position.

[1] [http://www.guardian.co.uk/business/2010/mar/04/greece-
sell-i...](http://www.guardian.co.uk/business/2010/mar/04/greece-sell-islands-
german-mps)

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kqr2
The ECB's reluctance to buy debt stems from Germany's (its strongest member)
deep fear of inflation.

From [http://www.npr.org/blogs/money/2011/09/09/140342690/the-
frid...](http://www.npr.org/blogs/money/2011/09/09/140342690/the-friday-
podcast-the-ghost-that-haunts-europes-debt-crisis) :

 _It goes back to the years after World War I, when Germany experienced one of
the most catastrophic bouts of hyperinflation in the history of the world — an
economic disaster that helped lay the groundwork for the rise of the Nazis._

 _So when Germany joined the euro, the Germans insisted that the newly created
European Central Bank be bound by strict rules aimed at preventing inflation._

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davidw
In the past, I've complained about articles from mises and reason.org, so it'd
only be fair to mention that this is basically politics as well, and likely
off topic because of that.

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Tichy
Interesting - though I have to wonder, what is to keep spending in check, if
the ECB just starts to buy whatever debt emerges? Could both sides be kind of
right (the moralizers and the spenders)?

