Euro Crisis: Path towards United States of Europe?

Is the Emmanuel Rahm creed of using crisis as an opportunity to expand political power being tacitly enforced in the Eurozone?

This from the New York Times, (bold emphasis mine)

As leaders in Europe try to contain a deepening financial crisis, they are also increasingly talking about making fundamental changes to the way their 17-nation economic union works.

The idea is to create a central financial authority — with powers in areas like taxation, bond issuance and budget approval — that could eventually turn the euro zone into something resembling a United States of Europe.

Officials have been hesitant to publicly endorse such a drastic change. But privately they say the issue has gained urgency in recent months, as it has become clear that Europe’s current approach, which requires unanimity on any significant moves, is unwieldy and inefficient. The idea is being promoted by some global financial officials, who worry about the risks that continued uncertainty in Europe poses to the global economy.

Recently, for instance, when an official from a European central bank met with a financial official in Washington, his host brandished the Articles of Confederation, the 1781 precursor to the United States Constitution, to use as an example of why stronger unions become necessary…

And that is why, despite all the political obstacles, Europe appears to be inching closer to a more centralized approach, and some officials are going public on the issue…

The idea of a European Treasury that would enforce fiscal discipline on wayward countries, while also having the power to spread European Union wealth from healthier countries to ones struggling to pay their debts, is fiercely unpopular among voters in many countries. Those in prosperous nations like Germany do not want to see their taxes used to bail out countries that borrowed their way into trouble. And those in weaker nations are reluctant to allow outsiders to dictate how their governments spend their money and tax their citizens.

I have dealt with this earlier.

Those who believe that the success of the Euro will depend on ‘fiscal and political union’ will acclaim this move as a necessity. They would see this as an elixir. Again, they would be wrong.

As I pointed out earlier, the Soviet Union (or Yugoslavia) had them both, but this didn’t stop these unions from dissolution. Proponents of the political-fiscal union nostrum, only look at the US as THE model, without looking at others. This is called the focusing effect.

Yet everything boils down to fundamental economics, where spending more than one can finance would extrapolate to insolvency, bankruptcy and or eventual political dismemberment. No amount of fiscal or political union will stop this. Politics will never supersede economics.

The obsession to centralize and its fulfillment would account for the death knell for the Euro.

Apparently the current political winds hasn’t been to wean away from the welfare state, instead, such gradualist actions toward a ‘United States of Europe’ implies of the opposite—the preservation and expansion of the tripartite political architecture of the welfare state-central bank-banking system. In other words, use the political union to save the banking system and expand control over the marketplace.

This reveals that the politicians of the Eurozone seek models that only suit their self-interests.

As earlier noted, the political climate of the Eurozone could be symptomatic of the state of the mental health of many Europeans.