Federal Europe? It just happened

Forget Angela Merkel’s treaty changes or David Cameron’s budget quibbles, the real event at last week Brussels summit was that Europe took an important step towards becoming a single state.

Published on 3 November 2010 at 12:19

Anatole Kaletsky argues that at 28/29 October summit in Brussels the EU took “its most decisive step towards becoming a genuine unitary State, by shifting key policies on taxes and public spending from national to federal level.” “That one of the most controversial decisions in modern European history has been taken with almost no public awareness or debate is a tribute to the top-down style of government perfected by the EU’s political elites,” he notes.

Beginning with the Greek crisis and creation of the €750 billion financial mechanism, to bail out nations unable to raise money, Germany jettisoned the Lisbon Treaty’s no bail-out clause and agreed to make itself financially responsible for what Kaletsky terms, the “spendthrift governments” of the EU periphery. However, the deal “to save the euro was never going to survive without some kind of commitment to permanent collective guarantees for the debts of eurozone governments… And such transfers would never be agreed by Germany and other creditor nations without much greater central control over national budgets than anyone had previously suggested.”

By agreeing that no country could be forced to leave the euro for failing to pay its debts, Germany also reinforced its commitment to future bailouts. “By explicitly revising the no-bailout clause, Ms Merkel’s treaty revisions will ensure that EU fiscal federalism will have irreversible legal force.” But why is Germany now agreeing to these new obligations? “There are two reasons,” Kaletsky writes. “First, German industry and finance are critically dependent on the stability and prosperity of the eurozone. Second, political unification has long been regarded as manifest destiny by Germany’s political and business elite."

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