Clamoring for a complete Eurozone fiscal union reached a new high this week as UK Chancellor of the Exchequer George Osborne agrees with Italian Economy Minister Giulio Tremonti on the need for a fiscal union and common bonds to save the Euro.
Please consider Italy calls for euro bonds as UK backs fiscal union
Italian Economy Minister Giulio Tremonti stepped up calls for a more coordinated response to the euro zone debt crisis on Saturday ahead of a potentially vital summit between the leaders of France and Germany next week.
Tremonti returned to proposals — rejected in the past by Berlin and Paris — for the creation of common euro zone bonds that would effectively make individual governments debt a common burden.
His British counterpart George Osborne, long a supporter from outside the euro zone of more fiscal integration within the currency bloc, went as far as to say that some form of outright fiscal union was now needed.
The austerity package unveiled on Friday, which contained a painful mix of spending cuts and tax increases, was demanded by the ECB in exchange for a commitment to protect Italian bonds but Tremonti said the problem risked spreading unless Europe ended its piecemeal approach to the crisis.
“We would not have arrived where we are if we had had the euro bond,” he said.
Osborne said deeper integration had been the inevitable conclusion from the start of the single currency project.
Asked if the only answer for the euro zone was some kind of fiscal union, he told BBC radio: “The short answer is yes.”
A new poll for the Bild am Sonntag newspaper on Saturday showed 31 percent of Germans believe the euro will be gone by 2021.
Common Bond Madness
The idea there would not be mess if “only we had common bonds” is madness. Had there been “common bonds” Germany and France would have undertaken all the fiscal problems of Greece, Portugal, Spain, Italy, and Ireland.
Note that French banks are directly under attack. That would have happened sooner if France and Germany bankrolled the rest of Europe.
Then France would have quickly fallen and the result would be where we are today, with Germany essentially bankrolling the problems of the rest of Europe.
Nothing much would have changed except the progression and timing of various countries. Shock waves might have hit Italy and France first (or every European country at once instead of starting with Greece) as the pool of savings in Germany and France was wiped out over time to keep the other European economies afloat.
Mike “Mish” Shedlock
Click Here To Scroll Thru My Recent Post List