Borys Kushniruk

Today I came across a message that German Chancellor, Angela Merkel, proposed to expand the authorities of the European Commissions on issues of the economic and financial policy.

In case of the approval of German Chancellor’s proposition the European Commission will gain the right to conclude agreements on the increase in competitiveness, attracting investment and the increase in the budgetary discipline with every country in the European Union.

The agreements have to be specified and detailed. This should facilitate the control over their execution. The countries will receive the opportunity to get additional financial aid.

It is quite possible that this proposition will face resistance on the part of many member countries of the Euro zone. Most of them fear the increase of the influence on the domestic policy of their countries from the officials from Brussels.

These fears do not lack logics. But at the same time I would like to observe that the fundamental problem of the Euro zone lies in the contradiction incorporated while creating it.

It is well known that the economic policy of any country consists of the five policies – budgetary, fiscal, regulatory, money and credit and also customs. All these policies have to be applied in combination to secure the effective governance of the country’s economy. But during the creation of the Euro zone, the governments of the member countries of the union kept on the national level the budgetary, fiscal, regulatory policies, at the same time having lost basically completely the control over the money and credit and customs policy. As a result, neither national governments nor the European Commission have an opportunity to fully manage the economy on the level of separate countries and the Euro area in general.

Obviously, this unnatural gap between the components of the economic policy cannot last for a long time.

During the last decade the economic consequences of such defective governance of the economy have been piling up, having led the countries of the Euro zone to the current state of the European economy.

Of course, the economic problems in most countries of the union are not only connected with the mistake during the creation of the Euro zone. The depth of current economic crisis of the Euro zone is the echo of the globalization of the world economy and the crisis of the existing world currency and financial system.

But taking everything into consideration, the countries, which constitute the Euro zone, will be able to leave the economic crisis only having agreed to form the full-fledged common European government which will have the authority to govern all the mentioned above policies. The other way – is to completely terminate the existence of the Euro zone in its present form and recreate it with a considerably lesser number of member countries. I will refrain from my personal vision of the further development of events. However, many, perhaps, find it obvious that the current model of the functioning of the European economy is inefficient and that is why its dramatic change – is a demand of time.

 

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