The Irish government, in a surprise move, announced yesterday that it would be putting the EU “fiscal compact” to a referendum. This comes as EU heads of state and government are preparing to meet in Brussels on Thursday for a two-day summit. European leaders are then expected – with the exception of the Prime Ministers of the UK and the Czech Republic – to sign the treaty for a fiscal compact on Friday.
Debating Europe will be focusing on the question of the fiscal compact in our posts today and tomorrow. Is this new treaty the answer to the Eurozone’s current round of problems? Should the Irish vote “yes” in their referendum? Protesilaos, a blogger from Cyprus, sent us the following video comment about the fiscal compact:
We put this question to Frank Engel, a Member of the European Parliament (MEP) from Luxembourg sitting in the centre-right European People’s Party, and asked him to respond.
I would say the fiscal compact is no remedy to anything. I am radically opposed to it, for the reason that it doesn’t even solve the debt problem, let alone the problem in the real economy.
This cannot but remind me of the “good old days” of Idi Amin, worried about inflation, who convened his parliament and made inflation illegal. The fiscal compact is no solution, because what it requires in term of debt reduction happens entirely within completely sovereign budgetary frameworks. It will have a negative effect for generations to come, until it either leads to massive social upheavels or the rules are broken and suspended again.
As an alternative or compliment to the fiscal compact, we’ve had a number of comments sent in supporting the idea of a common “Eurobond” mechanism. Michael, for example, argues that “we have to move fast with the first issue of [Eurobonds] before Germany gets downgraded too. If that happens then I would not like to see the next scenario.“
Eurobonds are not a solution. A financial transactions tax is not a solution. Those are instruments to complement or fill in a future European fiscal policy. We continue to live in the fallacy that nation-states can solve this crisis whilst still preserving separate fiscal frameworks.
The solution to the crisis is to mutualise debt, but to ensure that finally the EU acquires an independent budget that is sufficient for managing a currency; a currency can function without a state, but never can a currency function without a budget of a significant size.
What you are proposing would be a fairly radical step for Europe to take. We’ve had others argue that, politically, there is simply no mandate for this kind of integration. When we interviewed Alex Stubb, EU Minister of Finland, for example, he suggested a much more cautious approach. We’ve also had many comments sent in (such as this one from Marcel in the Netherlands) from people who say they simply cannot accept fiscal union in the EU. Are the people of Europe really ready for this kind of leap?
I am absolutely certain that the people of Europe are ready. The politicians better stop hiding behind the people. We are led by people who are, without exception, political cowards. These are not the Europeans leaders that people need.
What do YOU think? Do you think the fiscal compact is a step in the right direction? Or does the EU need to take much more radical steps to finally end the crisis? Should more countries hold referendums on the fiscal compact, or is it a mistake even for Ireland to offer one? And would it be better for the Irish to accept or reject the new treaty? Let us know your thoughts and comments on the fiscal compact in the form below, and we’ll take them to policy-makers and experts for their reactions.