My reply to this article http://www.ft.com/cms/s/0/a4271df0-2663-11e1-85fb-00144feabdc0.html#comment-1586251 in today’s FT:
Please can the FT go back and ask Frau Merkel what she really means by a fiscal union (or to use the phrase of choice from last week’s agreement – a ‘fiscal stability union’ see para 1 of this http://consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/126658.pdf).
I am pretty certain she means something very different to what most people mean, including officials in the US (which perhaps explains why Tim Geithner thought last week’s summit might come up with a workable solution – which it obviously did not).
When Merkel says fiscal union she in fact means enhanced stability and growth pact – read the summit agreement or read her proposal before the summit http://www.telegraph.co.uk/finance/financialcrisis/8941290/Fostering-fiscal-discipline-Angela-Merkel-and-Nicolas-Sarkozys-letter-to-Herman-Van-Rompuy-in-full.html.
She promises austerity yes, rules yes, punishment yes (as made clear in April by the way http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/120296.pdf ) – but not and never (if I have understood her previous comments correctly) what’s needed for a single currency to function effectively – and that is full fiscal (and political) union.
In other words, the euro needs a single treasury (logically controlled by a single executive, answerable to a single legislature, elected by a single demos), harmonised taxes, and a generous transfer union. As George Osborne rightly observed (like many before him, who were vilified for saying as much), that is ‘the inexorable logic of ever closer union’.
Full fiscal and political union was the dream of the founders of the EU – it is what Mr Delors admits he wanted (and regrets not getting) when he helped launch the single currency. However, Frau Merkel (and I suspect nearly every German) seems dead set against such a move.
No matter how much she might talk about the long game there is no serious attempt being made to sell this vision of unification to the voters in Germany or elsewhere in Europe – because none of the euro leaders appear to really share that ultimate vision either.
So please FT, for the sake of clarity – make sure nothing is being lost in translation – the future of the euro might depend on it.