Taking a really short break from tile work on the bathroom ---
Sarkozy & Merckle speaking of tighter economic controls today for the 17 EU member states, specifically to impose deficit limiting rules in each of the sovereign nation's constitutions:
"Consequently if the rule is to be adopted by the 17, it will not be an optional rule but obligatory."
It would require member states to voluntarily apply some arbitrary deficit limiting condition to their constitutions... but is stated as "obligatory"... meaning what? If they don't agree to adopt it in their constitutions they'll no longer be members of the EU?.... Sounds a lot like the kind of economic "federation of states" we had before the states realized they couldn't make it work and held the constitutional convention.
Basically, what Europe is dealing with is what we refer to as the "states rights" & "contract constitution" relative to the federal gov't issues ---- something that eventually came to logger heads with a civil war to finally resolve.
So the real question remains as before --- at what point in time, if ever, will the European states decide to create a European Federal gov't... giving up state's sovereignty? The EU has finally reached the point where economic / fiscal sovereignty of the member states places the wealthiest members (France & Germany) in economic jeoprody in order to maintain the Euro as a common currency, while at the same time placing fiscal austerity measures on the least wealthy members.
My opinion: The EU as an economic entity (block) has to remain intact to compete in the global capital system... giving it up isn't an option for the long term. Therefore, either the wealthy states spin-off the economically weaker ones in order to maintain the block (smaller, but with more economic clout), or the wealthier states have to supplement the weaker ones while investing to develop the weaker state's economic capacity to grow. This means providing more higher paying jobs to the weaker states, which take jobs from the wealthier ones (or at least limiting the economic growth of the wealthier ones). The problem for the present is that language & cultural/family ties & roots (not to mention the north/south & east/west prejudices) severely limit population migration to balance the job market's supply/demand balance & variance across the continent. To rectify this the wealthier states would need to incentivize private enterprise relocating to the less wealthy states... which both increases wealthy state expenditures and reduces job growth in the wealthier states. Fundamentally the net effect would require a massive redistribution of wealth (read Germany & France financing the weaker economic states at their own expense in jobs and tax revenues).
This is not unlike the U.S. pre-civil war conditions between north & south --- i.e. the "maintaining our way of life" issue, which prevented our south from beginning to industrialize (i.e. the wealthy land-owner class was ill equipped to invest in industrial development while retaining their class & economic status (in the south) from agricultural enterprises supported by low labor costs (slaves). In the U.S. the north could have chosen to relocate many of its industrial concerns to the south, taking advantage of lower labor costs (excluding the slaves), but in practise, the low labor cost white's in the south were loath to work in factories being supervised by northerners... the best they could muster was sending their wives and daughters to work in the factory's... but that required the white's to relocate within the south, leaving the white males searching for jobs (but just not in factory's) while their wives/daughters brought home the meager bacon so to speak. Culturally this wasn't going to work... and didn't as it turned out. The few northern industries that tried to get started in the south were unprofitable because they couldn't maintain the work-force (of whites). The southerners that invested in industry tried to use slaves as the labor force. That didn't work either because the value of a slave used in agricultural pursuits was greater than in a factory operation.... so slave owners were not economically inclined to use their slaves where they earned a lower return on their maintenance costs.
If Italy &/or Spain require a massive investment to keep from defaulting, the entire EU couldn't bail either one of them out, so they would have to exit the EU to reinstitute their own sovereign currencies... devaluing to keep internal costs down, hence bringing labor costs down, therefore enticing job growth at the expense of the wealthier nations. The reason France & Germany are opposed to creating an EU bond to finance a bailout of either Italy or Spain (or both) is that they (France/Germany) would be the predominant guarntor's of the bonds... effectively putting them in greater debt. Both Merkle and Sarkozy are fiscal conservatives, supported politically by fiscal conservatives... so they are loath to propose / support creating an EU bond. But, if it comes down to the choice of letting Italy &/or Spain bail from the EU or finacing their recovery by creating an EU bond, I'd bet that they'll create an EU bond... since, if either Italy or Spain drops from the EU, then the other will also drop out.... followed by Greece, Portugal, & probably Ireland as well... and who knows how many others will then bail.... which will effectively end the EU. So the choice by France/Germany has pretty stark consequences. On the other hand, maybe the system has to be broken first before it can be resurrected with conditions that effectively create a single European fiscal entity... i.e. individual state's sovereignty effectively becoming so restricted as to be equivalent to the U.S. state's relationship to the Federal Gov't.
We'll see. It is certainly an interesting time to be able to watch this unfold in real time, though, huh?
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