Euro Zone Crisis: A Plan For the (Sort Of) United States of the Euro?

Like the 50 states of the US, the 17 countries of the euro zone share a common currency. They do not share a common language, culture or religion; their histories are intertwined and (at least since the Roman Empire, which included many of the euro zone nations plus those in the European Union), at some point or other, various member nations have been at war with other member nations. Right now, the euro zone is mired in what is being called a fight for its survival. With five of its member nations forced to seek bailouts, a combination of sovereign debt and bad banks threatens the future of the 14-year-old economic union.

Writing in The Atlantic, Derek Johnson underscores that what the euro zone lacks, and what the US has, is a federal government that provides aid to states and takes in significant tax revenues. What is known as “permanent bailouts” in Europe would be “Medicaid” and “unemployment benefits” in the US, Johnson writes:

Unlike the United States, the euro zone collects a teensy share of total taxes at the EU level and has no legacy of permanent fiscal transfers from the richer countries, like Germany, to the poorer countries, like Greece

Some states — Alabama, Mississippi, New Mexico and West Virginia, for instance — “have accepted federal money worth around 200% of their annual GDP” in the past twenty years. Others (New York, California, Texas, Massachusetts) might well “be better off on their own currencies” as they regularly pay more in taxes than they receive in federal dollars.

“Gang of Four” Drafts Federal Plan to Save the Euro Zone

A key topic of discussion at Thursday’s and Friday’s upcoming euro zone summit in Brussels is a plan to turn the 17 euro zone countries into a “full-fledged political federation.” The new plan calls for the euro zone to have its own finance ministry — a new “treasury office” — and requires that member states’ budgets and fiscal policy be administered by a central authority.

The plan looks to the middle and long term, says the New York Times. But the problems facing the euro zone are immediate. Just on Monday, Moody’s downgraded 28 of the banks in Spain (the fourth-largest euro zone economy) to junk status.

The seven-page document for a federal “political union” was drafted by the “gang of four,” José Manuel Barroso, president of the European Commission; Herman Van Rompuy, the president of the European Council; Mario Draghi, the president of the European Central Bank (ECB); and Jean-Claude Juncker, the head of the group of euro zone finance ministers.

More specifically, the plan calls for the creation of a new European banking union; for the ECB to be given supervisory authority over EU banks, and soon; and for the creation of common resolution funds and a common deposit guarantee plan for Europe’s citizens who have placed their money into banks. The plan also seeks to mutualize debt among the euro zone member states — that is, to have member nations share debt, something that the ongoing debt crisis has shown a pressing need for.

Germany’s Merkel: “No liability without controls”

The proposal would impinge on the sovereignty of individual countries, something that the four designers of the plan have “skipped neatly around,” says the Guardian. While the four authors have “in effect,… suggest[ed] that the more euro zone nations integrate, the more debt mutualization there can be,” the question of how much integration will occur has been left open.

Germany, whose economy is the largest in the euro zone and whose support for the plan is vital, has been reluctant to “give a blank check to weaker euro zone economies.” It has indicated its possible support for the issuance of so-called euro bonds, which would be backed not just by individual member states but by the euro zone as a whole. But Germany remains insistent that, if it is to share risk with other countries, their governments must “cede more control over their spending and borrowing.”

Chancellor Angela Merkel’s “new mantra” is, indeed, “no liability without controls.”

France in particular is wary of yielding any sovereign powers. Merkel will travel to Paris on Wednesday to meet with French president François Hollande, to try come to an agreement; talks were held today among the German, French, Spanish, and Italian finance ministers.

Greece Gets One New Minister, Loses Another

After losing one finance minister, Vasilis Rapanos, to a “chronic health condition” before he was even sworn into office, Greece has named a new one,  Yannis Stournaras. However, another official, deputy shipping minister Giorgos Vernikos has resigned. The Guardian’s Helene Smith reports that the far left Syriza, the main opposition party, questioned Vernikos’ ties with an offshore company in the Marshall isles. Such connections are prohibited under Greek law and, says Smith, “in the new climate of post crisis Greece it would seem [the laws] are being upheld.”

Related Care2 Coverage

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German Court: Circumcision for Religious Reasons is a Crime

Photo by alf.melin

37 comments

Prentise W.
pre,tpse w5 years ago

Same with the "smart" electricity grid -- when part fails, it all fails.

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An Nijenhuis
a N5 years ago

@Magdalen yes, someone tries to form one big Reich during 1940-1945. It is all happening all over again.
I know we will be hit hard when the Euro crashes down. But at this moment we are being hit just as bad and the ens is not in sight.
Brussels decides everything now, whether we want it or not. They decided that no one can rent a house from a housing company when their salary is over a certain amount. They will ave to turn to private rental or buy a house. But private is unaffordable, buying is a problem because you don't get a mortgage when you don't have a steady job. With 24.000 unemployed every month and not finding a job or only finding temporary jobs (no one offers steady jobs any more, especially not with new laws on their way where workers can be sacked for no reason and can't do anything against it) you can't buy a house. Houses aren't sold at the moment and there is a waiting list for rental from at least 8 years...
They have decided that the Eurocountries have to hand over money so that they can save other countries or banks or the Euro. (ESM) It has already cost us millions of euro's, even now that we are facing cuts. So...they added even more cuts only to please Brussels.
When the ESM demands money we have 7 days to hand it over, there is no way you can protest of refuse, that will lead to a fine.
Van Rompuy now wants to get his hands on our pensions to share with others...they also want all countries to share in the debts that other countries have, they wa

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Magdalen B.
Magdalen B5 years ago

Wasn't there some plan like this a couple of times before? Didn't work well.....

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Vicki C.
Vicki Cook5 years ago

I agree with you Luvenia, we don't have enough red blooded Americans to fight for our rights like they did when the Colonists gave their lives so we could be free from England! I hate to see us trying to do that again. And as far as Globalization and having a ONE world run entirely by Corporations and Bankers..........well, we pretty much have that right here in the U.S.A. Corporations, Wall Street, And Bankers without any regulations and giving kickbacks to our Government is pretty much the same to me! I hate the corruption!! 1%, 2%, they all NEED to pay their own FAIR SHARE just like we all do (middle class and the poor)!!

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Pamela Tracy
Pamela Tracy5 years ago

POX ON THE EURO IT WOULD SCREW UP THE USA IF IT COULD....

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Marilyn L.
Marilyn L5 years ago

What a mess.

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Winn Adams
Winn A5 years ago

Thanks for the info.

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Duane B.
.5 years ago

Thank you for sharing.

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Sandy Erickson
Sandy Erickson5 years ago

Kepping an eye...

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kelly rahach
kelly r5 years ago

Fascinating process. A multiplicity of visions concerning power and control.

I see it as an evolution of thought and identity structures. Good for us for being thinking beings that keep on trying to reach out and find a better way.

At least there's no bloodshed this time around. We're starting to get it.

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