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Normal sovereign economies have 2 levers. Fiscal and Monetary Policy. The Eurozone doesn't have this setup as monetary policy is bloc-wide whereas fiscal polic

Normal sovereign economies have 2 levers. Fiscal and Monetary Policy. The Eurozone doesn't have this setup as monetary policy is bloc-wide whereas fiscal policy is national. With these levers working at different scopes this problem will always exist. And it's not the first time either. Remember Grexit? Same thing then. We either need a United States of Europe with fiscal transfer between countries or the euro should be scrapped so we can go back to lira, marks and drachma.

lottin 4y ago
This is true, but it isn't uncommon. Almost all countries have different levels of government - national, regional, subregional and municipal - all of which have some degree of autonomy with regards to executing their own fiscal policy, whereas monetary policy is always country-wide.
- bradwood 4y ago
  Yes. But something like federal taxation can be used to effect this fiscal transfer. No such mechanism exists in the Eurozone.
cm277 4y ago
That's not how the EU works. EU is driven by compromises between states. When a compromise is hard politically (like common debt was during Grexit) it gets shelved until a crisis rebalances things and a new compromise can be reached (as it was with common debt during Covid). So basically, if fiscal transfers are needed at some point to rebalance debt, we will get to that point and the EU will compromise again. Is there risk in this approach? absolutely, but it's pragmatic and based on a democratic process (the public opinions of all member states) rather than dogmatic based on some red/blue ideology/political split where compromise is unreachable, as in the US. In other words, even if the article is right, I don't necessarily see the trap; it's a trap now, based on current compromises. Those are (thankfully) elastic, as it's been demonstrated many times in recent history.
- bradwood 4y ago
  Firstly my comment was about the Eurozone, not the EU. Secondly, Central banking is NOT democratic. When last did you vote for your country's central banking head? When were members of that bank's monetary policy committee subjected to public scrutiny? Most people have no clue who they are, what their background is, and whether they are to be trusted tinkering with our money or assets. Who influences the dovish/hawkish make up of that group and, as a result, the bank's policy response? You? I don't think so.

lottin 4y ago

This is true, but it isn't uncommon. Almost all countries have different levels of government - national, regional, subregional and municipal - all of which have some degree of autonomy with regards to executing their own fiscal policy, whereas monetary policy is always country-wide.

bradwood 4y ago
Yes. But something like federal taxation can be used to effect this fiscal transfer. No such mechanism exists in the Eurozone.

cm277 4y ago

That's not how the EU works. EU is driven by compromises between states. When a compromise is hard politically (like common debt was during Grexit) it gets shelved until a crisis rebalances things and a new compromise can be reached (as it was with common debt during Covid). So basically, if fiscal transfers are needed at some point to rebalance debt, we will get to that point and the EU will compromise again. Is there risk in this approach? absolutely, but it's pragmatic and based on a democratic process (the public opinions of all member states) rather than dogmatic based on some red/blue ideology/political split where compromise is unreachable, as in the US. In other words, even if the article is right, I don't necessarily see the trap; it's a trap now, based on current compromises. Those are (thankfully) elastic, as it's been demonstrated many times in recent history.

bradwood 4y ago
Firstly my comment was about the Eurozone, not the EU. Secondly, Central banking is NOT democratic. When last did you vote for your country's central banking head? When were members of that bank's monetary policy committee subjected to public scrutiny? Most people have no clue who they are, what their background is, and whether they are to be trusted tinkering with our money or assets. Who influences the dovish/hawkish make up of that group and, as a result, the bank's policy response? You? I don't think so.