Political unity in Europe is essential in order to rid the financial markets of doubt and stabilise the single currency writes Emma Bonino, vice-president of the Italian Senate, former European commissioner and former MEP.
The following contribution was authored by Emma Bonino, vice-president of the Italian Senate, former EU commissioner responsible among others for consumer policy and a former MEP.
"In a climate of impending doom, EU finance ministers are preparing for the European Council meeting scheduled on 16 December, which will discuss a number of financial engineering proposals. All are aiming for the same outcome: to calm the markets. Will they work? Will they get us out of trouble?
If we try to observe ourselves from outside, we will find that the area where we live is not only one of the richest, but it also enjoys decent post-crisis growth, distributes quite equally the income it creates, does not have huge debts that are impossible to repay and maintains substantially balanced accounts with the rest of the world.
This area in which we live is the euro zone. It is true that China and India are growing at a steadier pace; however, it will still take them a long time until the standard of living of their citizens reaches ours. There is no reason to envy Japan either, whose economy has been stagnating for almost 20 years and has a public debt that exceeds its GDP. Or even the USA, which suffers from tremendous imbalances internally (distribution of wealth) and externally (balance of payments).
If we succeed in seeing ourselves as just one thing, as a single entity, then our own perception, as inhabitants of the EU, and in particular of the euro zone, will be more serene. And it would seem absurd that somebody could even doubt the survival of our single currency, the euro.
However, the problem is that we don't have political unity, and the markets can see that quite well: they do not 'calm' for exactly that reason and not, as some think, for the 'overly large' diversity that exists between European countries.
But, if we consider credit default swaps, we find that California and Illinois are risking failure more than Portugal or Spain. Nonetheless, the accounts of California and Illinois do not threaten the monetary union to which they belong, while those of Portugal and Spain do. And the reason for that paradoxical situation is only and just political: nobody will ever question the political unity of the USA, while the political unity of the euro zone and of the EU still doesn't exist.
Political unity means having – apart from a central bank, which we already have – a treasury (finance authority) that manages a federal budget, with dimensions sufficient enough to stabilise the system whenever it deems necessary, helping the states that have difficulties with a fiscal manoeuvre, an ordinary event to which nobody pays particular attention, unlike our continuous summits and our repetitive announcements of stabilisation manoeuvres which, as it seems, do not stabilise anything.
To really get out of this crisis, to really stabilise the euro, Europe should immediately start to convince the markets and the rest of the world that its political unity cannot be put into question. And the only way to do it is moving quickly to reinforce it so as to make it more credible.
But how? For instance, by creating a functional federal budget that finances the supply of important public goods, like defence, diplomacy, big scientific research programmes, trans-European infrastructural networks, the security of the commercial traffics and of the movement of persons, just like the American home security model.
We are not talking about the monster that haunts the dreams of the British Eurosceptic, a European superstate. On the contrary, we are talking about a 'light federation' that does not absorb more than 5% of the European GDP with the purpose of assuming the functions of a government, against around 20% of the GDP that goes to the federal budget of the USA, and against 1% of the current EU budget that only serves to distribute subsidies here and there.
Incidentally, 5% of European GDP corresponds to almost 650 billion euros, more or less the amount of the current Rescue Fund.
It is possible to imagine the Federation Light as the federation of Spinelli, Monnet and Adenauer adapted to the 21st century, an approach that simply acknowledges the reality: that the existence of national armies in Europe does not make sense any more, as nobody is threatening territorial integrity; that the infrastructure network already exists to support the internal market, though we finance it badly and hither and thither; that the customs union is already an exclusive competence of the Union and it is ridiculous to leave it to 27 different and separate national organisations.
A federation, then, but a light one. If we have the courage to do it now, immediately, the markets and the entire world would have not only a clear and strong signal that our political unity is not in question, but they would also learn that we finally have a federal budget with sufficient dimensions to maintain, as an ordinary administrative action, the macroeconomic stability of Europe.
Right after the launch of Jacques Delors' project on the single market, the Cecchini report referred to 'the costs of non-Europe', derived from the persistent fragmentation of the European market along national lines. And because the costs were really high, Delors' idea received a big impulse.
Today, there is no need for expert reports. The costs of non-Europe are obvious to everybody, and they are represented by the enormous sacrifices imposed on our citizens – an obstacle to the whole European economy – and by the useless coexistence with anxious doubts about the future of the euro and of the entire European project.
Getting rid of these doubts is not just urgent – it is also possible."
(This op-ed was first published in Italian daily La Stampa.)