Layer cakes, again

There is a somewhat technical report in the Financial Times which says that a group of somewhat fiscally conservative countries is floating a proposal to strengthen the €Zone‘s enforcement of its own fiscal rules against the likes of France and Italy (and others) that fairly routinely fudge their budgets in efforts to get something for nothing.

The so called New Hanseatic League consists of the Dutch, the Irish, the Baltic states (Estonia, Latvia and Lithuania) and the Nordic states (Denmark, Finland and Sweden); in this effort they have been joined by the Czech Republic and Slovakia.

Germany is on the sidelines, it is, philosophically, fiscally conservative but it is, also, closely tied with France in efforts to make Brussels even stronger, something that frightens the New Hanseatic League.

Now, I have mentioned before that “a reformed, revitalized Europe may need, at least, two towers, all resting on the big, broad, free(er) trade area base. I do not believe that the current €-zone, for example, can continue to exist when states as fiscally diverse as prudent, responsible Austria, Finland, Germany, the Netherlands, on the one hand, for example, must coexist with states as prone to fudging the numbers as, say, France, Greece, Italy, Portugal and Spain, on the other.” I still hold that view. I believed, way back when, that the European Exchange Rate Mechanism (an earlier (1970) version was dubbed the snake in the tunnel) which was introduced in 1979 to pave the way for the Euro, was fatally flawed because it relied on e.g. France, Italy and Spain to be honest about their finances which is something that they seem quite unable, not just unwilling to be. My ‘twin towers’ refer, of course, to the wedding-cake-drawing-template_164316multi-tiered arrangement that I believe will be needed, sooner rather than later, to save what is, arguably, the world’s greatest ever experiment in international unity. I think countries like Norway, Switzerland and the United Kingdom want to be on the “bottom layer” which is nothing but a free trade zone while some others, especially France, want to part of a deeply integrated “top layer,” which, they hope, will include a big, rich, and generous Germany. The Dutch and others want to be somewhere in the middle.

The great danger with a tiered arrangement is complexity. It needs three tiers, at least, but more than four is probably too many; but if there is more than two tiers, which there are, now, in the EU if you consider € and non € members and Schengen and non-Schengen members …

… then it may devolve into a chaotic federation in which each country tries to carve out a special status for itself.

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