The EU’s tilt toward centralization

Germany’s SPD party leader Martin Schulz and French President Emmanuel Macron greet reporters in Strasbourg
Leader of Germany’s SPD Martin Schulz (L) and French President Emmanuel Macron want more EU centralization, which could hurt the bloc’s competitiveness (source: dpa)

The political news of last week was dominated by issues such as the Brexit negotiations and the United States’ recognition of Jerusalem as the capital of Israel. These events were certainly important and worth reporting.

In the case of Brexit, the rather successful discussions between the United Kingdom and the European Commission were a natural and necessary development. Progress was made. The tone of the reporting on the continent was less malicious than it had previously been, and the reporting in the UK less defiant, even approving. This shows that both sides desperately need to reach a mutually beneficial solution. There will be no situation in which one side wins and the other loses – there can only be two losers or two winners.

The U.S.’s recognition of Jerusalem was a mainly symbolic move that reflects what has been the status quo for many years. In other words, it was realpolitik. In any case, many presidential candidates in recent decades have promised to transfer the U.S. embassy to Jerusalem, but none have ever followed through.

Centralization plan

These events overshadowed a plan by the European Commission to centralize the European Union even further. The EC published the plan on December 6. The lack of debate on the proposal belied its dangerous elements. The initiative is detrimental to the continent’s diversity and will hurt regional competition. It would introduce more central planning to the EU economy.

The plan proposes creating a common Ministry of Economy and Finance. (The argument that the internal market needs common policies implemented in Brussels is irritating.) Further, according to the plan, the European Stability Mechanism, an institution created to stabilize the banking system, would become the European Monetary Fund, controlled by the EC to stabilize the fiscal positions of insolvent member countries. The inherent danger is that it is likely to loosen fiscal discipline for political expediency.

Overcentralization is likely to either bring down the EU or make it uncompetitive globally

The Council may not accept the proposals this month – one big reason for this is that Germany has not yet established its new government. But the issue is on the table. A common Ministry of Economy and Finance would open the door for a common budget and, finally, a transfer union. The countries that are more efficient economically would be forced to assume the unionized deficits. While this is not yet included in the plan, it has been proposed by French President Emmanuel Macron. This has all the ingredients for destroying Europe’s financial stability.

‘United States of Europe’

Last week Martin Schulz, the leader of the Social Democratic Party of Germany (SPD), said that a “United States of Europe” would be his party’s goal if it becomes a partner in any future government. The idea targets the same unionized debt as President Macron’s proposal.

For now, full fiscal centralization is not included in the plan. We know, however, that when ideas are proposed in the EU, if they are not immediately accepted (or even rejected), they are nevertheless eventually introduced. In the past, German Finance Minister Wolfgang Schauble staunchly opposed the automatic transfer of financial obligations. He has gone. If the SPD joins a German government, or even supports a minority government led by Chancellor Angela Merkel, the implementation of such proposals could become more likely.

Technocrats and socialists love planned economies, debt financing and centralization, even though it has been empirically proven that decentralization, subsidiarity and regional competition are more efficient. The EU has already assumed more tasks than it can handle. Its core competence is the internal market, not fiscal and monetary matters. Overcentralization is likely to either bring down the EU or make it uncompetitive globally.

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