Federalism or Bust for Europe?
BRUSSELS – August was quieter than feared on the European bond markets. So, while resting on Europe’s beaches and mountains, policymakers could take a step back from the sound and fury of the last few months and think about the future. Is the eurozone sleepwalking into becoming a United States of Europe? Is it exploring uncharted territory? Or are its constituent nation-states drifting apart?
To answer these questions, the best starting point is the US. The model of a federal union that emerged from its history consists of a single currency managed by a federal agency; closely integrated markets for products, labor, and capital; a federal budget that partly, but automatically, offsets economic disturbances affecting individual states; a federal government that assumes responsibility for tackling other major risks, not least those emanating from the banking sector; and states that provide regional public goods but play virtually no role in macroeconomic stabilization.
This model served as a template for the European Union’s architects, notably for the creation of a unified market and a common currency. But, in several respects, Europe has diverged significantly from the American model.
We hope you're enjoying Project Syndicate.
To continue reading, subscribe now.
Get unlimited access to PS premium content, including in-depth commentaries, book reviews, exclusive interviews, On Point, the Big Picture, the PS Archive, and our annual year-ahead magazine.
Already have an account or want to create one? Log in