The currency union’s supposed fatal contradiction is expressed in various
ways: that monetary union requires political and fiscal union; that the
eurozone yokes together nations moving in different economic directions;
that inter-bloc trade imbalances cannot be resolved. All of these can be
reduced to a simple fact: without goodwill from investors and solidarity
from politicians, this union cannot stand.
The German government’s fierce resistance to eurozone bonds is discouraging.
After all, if investors do not believe that the bloc can limit member
governments’ deficits and penalise abusers, the project will fail. Eurozone
bonds are a good way to show this common purpose.
The opposition is ill-timed. A rapid agreement might defuse market tensions
and even make it easier to maintain investors’ confidence in the whole bloc
after a default by one or two individual countries. And, as Barclays Capital
points out, a basic structure could be erected fairly quickly with some
simple financial design tricks: credit guarantees, priority for repayment
and the use of specific tax streams as collateral. Investors would gobble up
well-designed bonds, since a 2011 deficit of 4 per cent of gross domestic
product for the bloc as a whole will be much less than in the US or Japan.
Nonetheless, politicians’ behaviour is still good enough that the eurozone
does not face certain doom, even without the bonds. A Spanish election and
near chaos in Italian politics have not stopped the governments from acting
as if they had to meet eurozone bond fiscal criteria. The European Central
Bank has also acted to create ersatz solidarity (through bond-buying and
bank support) while chivvying governments to develop the real thing. That is
exactly what Angela Merkel, the German chancellor, wants. Her rejection of a
“debt union” is less important than her clear call for a “stability union”.
Dit artikel is oorspronkelijk verschenen op z24.nl