Beyond Maastricht: a new deal for the eurozone

Europe’s Economic and Monetary Union has been an extraordinary achievement. But the events of 2010 have made it apparent that its political governance was designed for fair weather. Having reluctantly taken the first steps this year, European leaders must now make it storm-proof. The move to an agreement to establish a permanent European Stability Mechanism (ESM) to replace the EFSF in 2013 represents a fundamental and encouraging change in the approach of European leaders to the future of the eurozone. But the new model of eurozone governance currently envisaged by the EU, which is based once more on the Maastricht Treaty, will be vulnerable to failure for the same reasons as its predecessors.

If Europe wants to remain a serious player and help shape the twenty-first century, it should instead go beyond Maastricht and finally build a monetary and economic system strong enough to last. There are at least three other solutions – Eurobonds, a euro-TARP and an expansion of the federal budget. Yet each of them is opposed above all by Germany, the eurozone’s dominant power, which feels its robust growth vindicates its own economic model even though its political model for a rule and sanctions-based governance of the eurozone looks to have failed.

Europe now faces a choice between a future of permanent tensions within the EU and a new grand bargain. Europe needs clearheaded, forward-looking German leadership that would anchor a European Germany in a more German Europe.

• Primary Source

ESO: EU leaders back new bail-out system http://www.europeansources.info/record/eu-leaders-back-new-bail-out-system/

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