Economic Federalism will save the Euro... and Europe !

, par Noëlle Lenoir, Translated by Jill Haapaniemi

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Economic Federalism will save the Euro... and Europe !

Noëlle Lenoir, former French Minister of European Affairs, takes a stance on the future of the euro that is currently in the midst of crisis in Greece. For her, economic federalism is the solution. Here is her opinion.

After the crisis of private debt, a crisis of sovereign debt

It was the burst of the financial bubble in 2008, after banks flooded the markets with toxic loans and other foreign products, which is the source of the crisis of sovereign debt. And now, it will be up to the states and their taxpayers to deal with it !

Certainly, a number of countries in Europe, like France, and even more so Belgium or Italy, have had longstanding excessive debts. But this debt has never been on the scale of that of the US, who has made debts now largely dependent on Chinese investors.

If the banking crisis, influencing the public European finances, further worsens the situation, the debt of European states will still not (perhaps with a few rare exceptions) compare to the unfathomable state of our great American partner.

However, that this thought even exists today means that we are on the verge of disaster. We should prepare ourselves to deal with the collapse of the euro zone. As with the inevitable effect of a house of cards, the restructuring of the Greek debt would ultimately lead to the failure of other countries, being driven out of the euro zone.

To give into this widespread panic would be unwise, and even a huge mistake. It is not because a certain Anglo-Saxon has been doing this for over two years, day after day, reporting on this nightmare scenario, attacking the European currency relentlessly, that we must admit defeat.

Economic federalism a necessary addition, and is now becoming urgent for the creation of a single currency

The conditions for the protection of the euro, and of the general legacy of the founding fathers of Europe, are closely connected to the construction of a real political Europe. This implies :

• That the European political responsibilities, instead of giving into defeatism, must finally have the courage to come together to remember what the euro is as a force that protects Europe and its economy ;

• That the necessary decisions to allow the Greek government to continue its efforts of discipline should be made immediately, instead of being postponed to an unlikely set date ;

• That, one way or another, lending banks should contribute to help the states after the states have given their help, otherwise the discipline will become unacceptable to the public opinion ;

• That pooling is implemented, along the lines of the « funds of bank resolutions » proposed by Michel Bernier, allowing banks to handle the bankruptcies of institutions, without having to rely on state aid ;

• That a common European legislation on bankruptcy is quickly passed, with the goal of both simplification and protection of creditors, employees and shareholders of the banks involved ;

• That from now on credit rating agencies refrain from rating states in terms of other euro zone countries, making their judgments solely on the euro zone as a whole ;

• That the Euro-group has the possibility to launch real European loans to financially help what is required, in a collaborate framework, for each of its members ;

• And that very logically, the economic policies- fiscal and budgetary- of the euro zone countries will at last be aligned so that the Union between them is both economic and monetary, so that states will stop limping on their one stronger financial foot !

Europe cannot stay on the fence forever. Everyone knows it : there can be no sustaining monetary federalism without economic federalism. Otherwise, Europe will stay a secondary actor and its citizens will eventually detach themselves from Europe.

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