Tuesday, July 10, 2012

Europe’s Divided Visionaries

by Barry Eichengreen

Project Syndicate

July 10, 2012

Europe’s leaders, unlike former US President George H. W. Bush, have never had trouble with the “vision thing.” They have always known what they want their continent to be. But having a vision is not the same as implementing it. And, when it comes to putting their ideas into practice, the European Union’s leaders have fallen short repeatedly.

This tension between Europeans’ goals and their ability to achieve them is playing out again in the wake of the recent EU summit. Europe’s leaders now agree on a vision of what the EU should become: an economic and monetary union complemented by a banking union, a fiscal union, and a political union. The trouble starts as soon as the discussion moves on to how – and especially when – the last three should be established.

Banking union, Europe’s leaders agreed, means creating a single supervisory authority. It means establishing a common deposit-insurance scheme and a mechanism for closing down insolvent financial institutions. It means giving the EU’s rescue facilities the power to inject funds directly into undercapitalized banks.

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