Euro Area

[Papewaio]

It's still an economic solution. It wasn't formed out of warfare, their isn't a Euro Foreign Legion, it wasn't formed to give more representation to the people, it wasn't formed as a supranation. It was formed over economic ties, and now with no cold war looming over them to unite behind... The EU is having trouble to handle the current economic crisis.

Since that is supposed to be the EUs strong suit one should start looking at the fundamentals and understand why theist fifty years have been successful.

For starters no war in Europe means that there has been more prosperity for all. But why hasn't there been a war? Maybe because of the nuclear arms race by the US and the USSR... A prosperity in Europe paid for outside of the EU.

Financial services are supposed to be Europes strong point... Why the the GFC... Surely Europes vaunted vaults should have had been more robust... So if economics and financial services aren't enough to unite Europe what is?

Remaining individual sovereign states is fine. Just don't expect to have as much world political clout when both China & India have middle class populations greater then the size of Europe. After all their networks and economic clout will each rival the entire EU.

[Papewaio]

Power is not a zero sum game otherwise the cavemen would have the same power as modern man. Europe is on the right track, real long term prosperity can be found more readily through economic entanglement not resource pillaging.

[Philippus Flavius Homovallumus]

Power is not a zero sum game otherwise the cavemen would have the same power as modern man. Europe is on the right track, real long term prosperity can be found more readily through economic entanglement not resource pillaging.

Of course it's a zero sum game, because (as Louis said) it is relative, if I become more powerful your power diminishes relative to mine, and therefore relative to everyone else.

[Papewaio]

On a ranking system yes.

On a system that measures quality of life factors: no.

My nation increasing it's inhabitants length of life, reducing disease, reducing infant mortality, increasing literacy, increasing freedoms and choice makes my nation more powerful. And doing the same for another nation only increases my nations security and power.

Zero sum would not have allowed us to go beyond the groups of Chimps. Game theory neatly explains a lot of this particularly the need to factor in future interactions.

Zero sum can only exist in a static environment.

[Philippus Flavius Homovallumus]

On a ranking system yes.

On a system that measures quality of life factors: no.

My nation increasing it's inhabitants length of life, reducing disease, reducing infant mortality, increasing literacy, increasing freedoms and choice makes my nation more powerful. And doing the same for another nation only increases my nations security and power.

Zero sum would not have allowed us to go beyond the groups of Chimps. Game theory neatly explains a lot of this particularly the need to factor in future interactions.

Zero sum can only exist in a static environment.

"Quality of life" is not particularly relevent to political power, which doesn't mean I dissagree with your statement, I still don't see it as relevent, however.

[Papewaio]

Because if you are basing a government on the theory of consent: "The will of the people shall be the basis of the authority of government."

Then the power of a government increases with the quality of life of its people.

[phonicsmonkey]

Consent is a key issue here.

European monetary union is founded on a false premise - that a group of countries can share a common currency without a common fiscal policy. The current crisis amply demonstrates the folly of this premise.

Indeed, it is not too hard to imagine that the original architects of the monetary union knew this full well and simply pushed ahead without due regard for the ultimate consequences. For the whole project was always political and not economic as has already been noted.

To my mind there are these possible long-term outcomes to the current situation:

- The union survives with full fiscal union. This is highly unlikely as it would effectively also be political union. If a government has no control over its revenue and expenses it cannot be said to be politically sovereign in any meaningful sense. I don't think either the political class or the voting public in any european country is ready for this. Just look at the abject failure of the last round of referenda. This is where the issue of consent comes in.

- The union dissolves. Highly unlikely as the political desire for monetary union is still strong enough in some sigificant quarters and the fear of how the markets would react to a break-up of the monetary union is even stronger. In practical terms this needn't be difficult - as noted above, currency unions have dissolved before and there are metrics available on which to base the exchange rates for a transition back to domestic currencies. As to Euro-denominated debt it is not hard to envisage a series of swap deals whereby it could be exchanged for the equivalent debt denominated in the local currency of the country of the issuer.

- The union survives with very limited fiscal union. Such as Euro-denominated bond issuances backed by the full faith and credit of some or all EU members who are also in the monetary union, to replace or stand behind the questionable debt of those peripheral countries currently targeted by the markets. This is tantamount to a sticking plaster on an open wound. It will succeed in 'kicking the can down the road' as the Americans would say but will not solve the inherent problem of discordant fiscal policy among member states. Lack of 'harmonization' if you will. And another crisis will one day result. Nonetheless I see this as the most likely outcome as it involves the path of least resistance for policy-makers, market participants and the public.