By Simon Johnson; this post comprises the first three paragraphs of a column now running at Bloomberg View.
Jean-Claude Trichet, president of the European Central Bank until October, last week floated two proposals aimed at dealing with Greece and related eurozone public-debt problems.
The first idea would allow European Union authorities to override the policy decisions of member governments that can’t come up with sustainable budgets, implying the creation of an external control board for the likes of Greece. This approach has been used in the past for very weak countries (as well as for the cities of New York and Washington in recent decades). In Europe today, it would have no political legitimacy and would be completely unworkable — imagine the street protests it would spark.
The second idea would, down the road, create a finance ministry for the European Union. It would issue debt and have responsibility for a unified financial sector. This is just as brilliant as Alexander Hamilton’s fiscal and financial integration proposals for the young American Republic and, if implemented properly, would fix the deep problems caused by the original design of the eurozone.
To read the rest of this column, please follow this link to Bloomberg View: http://www.bloomberg.com/news/2011-06-06/europe-needs-trichet-s-unified-finance-ministry-simon-johnson.html
The Baseline Scenario 
“National sovereignty” is just another one of those barbarous relics.
The new world order seems to be coming fast. Good for financiers; as for labor, to quote Borat, not so much.
Austerity is not always an easy bolus to administer: 50,000 turned out in Athens against austerity. Ireland and Latvia may have a history of tolerating oppression, but the cultural pride present in many European nations may present impediments to the timely and efficient implementation of raising the costs of living (thus disproportionally hitting at those in the lower demographics).
It may be too late for financiers to dumb down the public education system to avert the natural outrage that this generation will perceive.
I find it astounding that the proposed solution to financial mismanagement on an epic scale is stronger and more centralized financial management. Is this free trade? Is this capitalism?
@ jeff simpsoon
“Is this free trade? Is this capitalism?”
Has there ever been? Will there ever be? No. No.
Who finds it difficult to take the heat in the EU-financial kitchen should get out of it! Or never enter it. Good reasons for either choice. That is so for countries like Greece and Germany alike. If they want to keep building on the EU project, a ministry of finance sounds like a sensible option. Causing a collapse is not the way to go, neither for Germany, nor Greece.
“It may be too late for financiers to dumb down the public education system to avert the natural outrage that this generation will perceive.”
BINGO! Or almost, for it’s not 100% clear what you want to say. Re-adjusting to the structural challenge og the wester economies may require a dumbing down of education. However, can these societies afford the cost of so doing with the only expected benefit of social peace?
“Eurozone on the Brink, as Usual”
I’m going Devil’s Advocate today Simon? Gotta get the grey-matter out of its funk?
“China’s Five-Year Plan: Key Points” 3/15/11
Ref: http://www.telegraph.co.uk/finance/china-business/8363275/chinas-five-year-plan-key-points.html
“Economist Urge Ministers to Stand Firm on Austerity Programme as IMF Verdict on Britain Looms” 6/5/11
Ref: http://www.telegraph.co.uk/finance/economics/8558382/Economist-urge-ministers-to-stand-firm-on-austerity-programme-as-IMF-verdict-on-Britain-looms.html
China’s implementation of a “Inward-Growth (endogenous/exogenous derivatives?) Plan” for five-years…if it comes to fruition will be a boom for the European Union. All countries large and small should benefit from the growing and affluent new low to middle-class consumers in China. (JMHO)
Noteworthy: It is the French who lead the world in Nuclear technology. It would be wise that they (France) switch from Uranium Fuel to Thorium Fuel Power Plants which is “Absolute Melt-Down Safe! HUGE! The Indian’s have just brought a Nuclear Thorium Power Plant on line and have several more in the planning stage. Already, there are several more being built simultaneously as I write.
Ref: India’s Kakrapar-1 Reactor Fully Operational by 2011 – “Existing Thorium Energy Project” (scroll down)
http://en.wikipedia.org/wiki/Thorium
As I was saying – the German’s, French, Greek’s, Spanish, Irish (Scotch – Welch), and Portuguese and lastly Italy – all peripheries could see a fantastic tourism movement, if, and only if, they can bring their stubbornly high $Euro down to Earth?
Thankyou Simon and James
God Bless You, Julian Assange
Talk about turning a crisis into an opportunity. Instead of causing dissolution of Brusselcratic rule, the Greece crisis is being used as an pretext for taking fiscal control of all European governments.
Your first clue that something isn’t good for the people is if making it public would cause rioting in the streets.
@via fCh: The hammer in the EU toolbox continues to bash away at the malleable political weaknesses that somehow, at least to some, still resemble the head of a nail.
Dogma, spin, propaganda. These are a few of my favorite things (not). Unfortunately, when introduced into the public dialectic and the educational system, they hinder the ability to think clearly, and in so doing taint and distort other areas that, for the purposes of improving society, should be better left alone. A simple example: teaching creationism in biology class is an active disservice to education, most simply if one examines that it undermines the impartial empiricism that is one of the great hallmarks of the scientific method. Tell them it was all done by a wizard and they stop delving at the root causes. But they will accept the short-sighted political tripe (austerity, coming soon to a town near you) being foisted on us by those with no interest in The Commons (thanks to globalization).
The real question, the more I consider it in recent days, is the question as to whether the European Economic Union is even a good idea from a global perspective. Of course, the trend is one which global entrepreneurs and the wealthiest global citizens love. It creates much greater control. One only wonders if the price paid in terms of basic human and national rights is too steep. I certainly creates a situation where the largest, most profitable are put in control of the smaller and less profitable nations. Sadly, it seems that the major actors in the Eurozone are wanting to solely dictate terms which are useful to them, and completely at odds with the success of the smaller, poorer countries. It’s a real tragedy for Greece, and may soon be one for Portugal, is quickly becoming one for Ireland, if not already so, and Spain must be shaking in its boots, at this point. I certainly understand the need for the Eurozone to consolidate its power, as an international force, but the real question is, in the long run, will it truly have a general positive effect for the citizenry in all participating nations. That I truly question.
“Thinking ahead…but just by a nose?”
The last thing the world needs is a fragmented European Union, period! Certainly it’s having its share of growing pains, but that’s to be expected with a fledgling Unification (Republic?). After all it was created just thirteen-years ago (1999) and has done more good than bad (JMHO), offering capitalism and democracy to countries once deemed as an impossible task because of their communistic roots forced upon them by Russia.
It is of the utmost importance for America and the free world to have the Eurozone exist. Not as a subordinate, but as our equal…and, as our stalwart ally for freedom as we’ve known for two-hundred years here in the “Republic of the United States”!
China will in all likelihood be the dominate world power, both militarily and financially in less than a decade {(JMHO)(Man, I can hear the rumbling now…oh well)} and certainly will push their weight around?
But with a strong European Union and Strong North America they will be restrained.
Russia will play both sides as in WWII with one siding with whom as a toss-up for the lesser of two evils (no need to get into history lessons?). But I wouldn’t trust the Russian’s as far as I could throw a brick across their finite psychopathic rubicon rationale (again JMHO).
So it’s important…before we think of the world as one hunky-dory globalization harmonious sphere, cause it ain’t. It’s always been dictated by the East or West emphatically stating that the sun shines first upon their souls? So who wants to be first?
What’s wrong with the Eurozone? Nothing, that a little time can’t cure…:-)
Thanks Simon
Yes a finance minister for the European Union is a good idea, provided that he/she will not be French, German, Italian, Portuguese, Greek, etc. Then to issue EU debt we do not need a finance ministry it can be done now instead of setting up the different facilities to bail the different countries out.