Today Alistar Darling, former Chancellor of the Exchequer and British MP, issued an op-ed in the New York Times describing the current plight of the Euro, and the steps necessary to check the monetary contagion spreading to the European continent. The article is entitled “Europe’s Piecemeal Failure” and acknowledges that Europe’s financial woes are, in part, due to insufficient political solidarity underlying the economic union. Mr. Darling says something fairly intuitive when he argues:
More than anything, the problems in the euro zone have exposed the monetary union’s basic fault line. The euro zone shares a common currency, but the political and economic union that underpins it has a limited ability to resolve disagreements among member states and to take decisive steps to resolve difficulties.
Transatlantic analysis have long insisted that a politically stronger EU would be better able to coordinate monetary and fiscal policy, and ensure that economic crises are met with a measured, coordinated response. As a speaker at a recent conference on the Euro said, its better to have one dynamic central bank react to a crisis rather than 16, uncoordinated central banks.
While MP Darling’s op-ed has some very good suggestions, it is misleading on two important levels. First, he misrepresents what many transatlanticists have been saying about greater European and Atlantic integration. When discussing greater political unity in Europe, Mr. Darling utilizes a one-two punch of logical fallacies that begins with a straw-man (or Aunt Sally in his native tongue) and closes with a false choice. He writes:
The result is a political crisis alongside the economic one: commentators speak as if the only options are complete political union or the breakup of the euro zone. But the first will not happen, while the second would create many more painful and destabilizing problems.
By only acknowledging this stark—and false—choice, Darling is forgoing a number of allies in the Atlantic community, who largely agree with his position. A stronger European Central Bank and better contingency plans for large-scale defaults in the Eurozone are two steps integrationists have been calling for. Many here at the Streit Council would also agree with Mr. Darling’s later assertion that imports play an essential part in the transatlantic economy, and that greater cooperation within the transatlantic community is needed to speed along the fragile economic recession.
Second, Mr. Darling is disappointingly hesitant to admit that providing the European Union with greater political power would supply the dynamism he claims the European Central Bank currently lacks. It is difficult to comprehend how the EU Central Bank can act decisively if it is undercut by the constant hand-wringing of member states. The ECB, just like the U.S. Federal Reserve, needs the autonomy and political backing to be a more forceful player in the world economy. Or, to put it in terms Mr. Darling is familiar with, focusing solely on a stronger central bank without political support would be like seeing Pink Floyd without both Roger Waters and David Gilmour—and anyone who has heard the Division Bell knows what a disaster that would be.
Griffin W. Huschke is the Mayme and Herb Frank Fund Research Fellow at the Streit Council. Photo Credit: International Monetary Fund