From today's Open Europe news summary:
Van Rompuy proposes fiscal integration through limited Treaty change;
Eurozone working on three-pronged financial backstop for eurozoneEuropean
Council President Herman van Rompuy has drawn up plans for fiscal integration in the eurozone which would not require only unanimous consent in the Council rather than ratification at the national level – thereby avoiding an Irish referendum or tricky parliamentary negotiations in all 27 member states. Under the plan eurozone states would enshrine debt and deficit limits in their constitutions, as well as a balanced budget commitment, and the European Court of Justice would judge whether they had been properly enforced. These changes could be made by amending protocol 12 of the EU Treaties, which relates to excessive deficits, rather than a full revision. Under this method the European Commission would not have the power to discipline countries which continually breach the fiscal limits, something which Germany is keen on. Van Rompuy therefore also sets out a plan for wider treaty change which gives the Commission greater power. Lastly, the proposal calls for the ESM, the eurozone’s permanent bailout fund, to have access to ECB funding.
One only has to ask why Van Rompuy demands that any member of the EU should have any say over the budgets of its fellow members to begin to understand the problem. The answer is simple--the structure of the euro socializes irresponsible behavior. Ludwig von Mises explained very clearly the social consequences of capitalism and socialism. Under capitalism the acting party itself enjoys all the benefits and suffers all the losses of his actions. Under socialism the acting party must share his benefits with all others and force all others to share his losses. So capitalist countries go from strength to strength as those who incur losses are forced from the market and are replaced by those who succeed. The exact opposite happens under socialism--those who succeed are fleeced in order to subsidize those who fail until the capital stock of the nation is consumed. Van Rompuy admits as much when he demands that the EU have control over the budgets of irresponsible members. This undemocratic interference into the affairs of a sovereign nation is required by the fact that the euro is a socialist project. As Philipp Bagus explains in his excellent book The Tragedy of the Euro, irresponsible nations export their losses to all the other members of the EU via their ability to print euros, and the responsible nations automatically bear the costs. The misconstruction of the euro (Philipp Bagus' term) means that the entire continent of Europe will be socialized to a greater and greater extent until its capital stock is consumed. We see it happening now with Greek pensioners retiring in their early fifties, thereby consuming capital, and forcing their German neighbors to work into their late sixties to pay the bill. Merkel is taking the wrong approach by demanding that Germany control Greek's budget. No self respecting, patriotic Greek could ever agree to such interference. And such interference is unnecessary. Scrap the euro and the consequences, for good or ill, of each country's internal policies will be borne by that country alone. Capitalism, with all its social benefits of rewarding success and punishing failure, will return to the international financial markets. Instead of constant bickering and threats of foreign intervention, each country will have an incentive to live within its means because it will not be able to live at the expense of its neighbors.