From the 1950s, the European Heads of State and Government edges closer. Community coal and steel cartel came first the European. Then with the common market. The European Union contains the now 27 Member States. Then the disappearance of many border controls within the EU. Finally, the euro. Each step on the road gave the Nations of Europe a little more sovereignty, delay, EU officials in Brussels on regulatory issues, the judgments of the Court above, honor and - with some exceptions such as for example UK - power interest rates of the ECB set.
One thing nobody showed: performance of the national budget. Fiscal Union, has a central authority to definitively say about the issues of the country and taxation, was never a possibility. Politically at least, it was too far a step: the nation itself to control was to control the budget.
Now the idea is how never previously discussed. The desperate rescue attempts launched in Europe in the last two years mark a step towards the fiscal Union, although Germany, the most important EU still against. Resistance means that real fiscal Union "really, really still a long way", says Fabio fois, an economist at Barclays Capital in London. Nevertheless, the Europeans seem to be headed in that direction.
Why? First of all with the ECB to buy Italian and Spanish bond of Greek contagion spread, are the Central Bank and its President, Jean-Claude Trichet, de facto financial masters of the States, they are saving: if Italy backslides on reforms, the ECB stop buying their bonds and leave the market wolves.
Long-term solution needed
So far, the ECB cut binge buying yields on bonds of the Spanish and Italian by more than a point. "It is not perfect, but this is sustainable," says Steven major, global head of fixed-income research at HSBC. "The longer-term solution includes a kind of fiscal Union, and we need time to that." The Royal Bank of Scotland Group estimates that the purchases of Italian and Spanish debt by the ECB and the EU can reach €850 billion ($1.2 trillion) bailout funds after all.
Buy European stability financing facility soon do the EU last year to make sure that the Greek crisis should be spread, the bond, which has launched the ECB in the life. The EFSF is all the region's Euro bond to buy more advanced powers of members of the eurozone, so that it can help the Member States, before a full-blown rescue operation is needed. Represented by the Fund, the EU may impose austerity measures on States of the eurozone, which eventually need help. This authority is similar to making, which would have a Ministry of Finance of Europe.
The other factor which brings closer fiscal Union in Europe is the way, that the EFSF is funded. Money for his rescue efforts, the Fund must issue bonds guaranteed by all Member States of the eurozone. The first bond issue of EFSF in February, for € was 3.6 billion a great success from this warranty. Now, two other offers have also done.
This funding method a prototype could be how an EU tax would work. In Member States, that their own bonds that are supported by their own Governments would be issued Eurobonds with the support of all Member States. It would be more difficult for bond vigil front, supported by 17 countries, as the bonds of Greece or Italy alone attack the bonds.
A European Ministry of finance?
Trichet, one of the architects of the Maastricht Treaty, which said the euro, in June that he favoured a European financial Ministry and veto powers for the EU compared to national budgets. "It would be too bold to imagine in the economic field, with a single market, a single currency and a common Central Bank, a Ministry of Finance of the Union?" he asked in a speech in Aachen, Germany.
For a number of officials, still the answer is Yes. "This great risk-pooling exercise not easy come, and the risk of a political consequences will be great," Jacques Cailloux, Chief Economist of the European at RBS, wrote in a recent note.
The German, who have spent the most money to bailout plan for the eurozone neighbours, lead still the opposition. "We need no fiscal Union and should we refuse, since, the resolution of responsibilities, mark," says Michael Meister, spokesman of finances for the Christian Democrats of Chancellor Angela Merkel. Merkel Coalition ally, Christian Social Union, "not, supported", said Horst Seehofer, President of the Party on 7 August. The plan cannot be "left seriously by everyone."
The situation in Italy shows also the desire to preserve fiscal independence. The Government in Rome to the financial markets and officials "Brussels, Frankfurt, Berlin, London and New York" has ceded newspaper wrote former EU competition Commissioner Mario Monti in an editorial in Corriere della Sera Milan on 7 August. The result of Monti wrote a "political demotion" for Italy, that potential growth will damage. Yet the defeat has taken Italy, for its weak finances, a lot of damage, has also added.
The bottom line: By issuing bonds, all members of the eurozone backed by, EFSF showing how a central Ministry of finance might work.
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