Several news sources report that Angela Merkel may not want to face a collapse of the EU because efforts for a coordinated financial rescue have failed. Part of the reason for the process being arrested as it is currently is because of Germany’s insistence that austerity measures for troubled economies is a preferrable path to costly stimulus. Her theory, which could easily be true, is that to give irresponsible governments more money will only cause them to be more irresponsible.

The problem might be solved, Germany newly argues, if there was on financial authority for all the EU. Germany may favor this because its contributions to support this structure would give it ongoing leverage with its poorer neighbors. Or Merkel may actually believe that the present situation is untenable and that serials defaults could bring down EU based banks which hold hundreds of billions in sovereign paper.

Reuters reports:

After falling short with her “fiscal compact” on budget discipline, German Chancellor Angela Merkel is pressing for much more ambitious measures, including a central authority to manage euro area finances, and major new powers for the European Commission, European Parliament and European Court of Justice.

She is also seeking a coordinated European approach to reforming labor markets, social security systems and tax policies, German officials say.

The suggestion makes sense, but the European governments have a history of destroying plans, via bickering, which might benefit them.

Douglas A. McIntyre

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