I've written another column about Europe for Bloomberg: To Put Europe Back on Track Try Listening to Voters.
Questions of sovereignty in the EU have moved from the theoretical realm to the street. People in Greece and other distressed countries are asking by what right foreign governments are demanding higher taxes, stripped-down public services and lower living standards. The current financial emergency isn't just a sovereign-debt crisis but also an EU constitutional crisis.
You see the problem. At a time when many of Europe's voters are blaming EU institutions -- and the euro in particular -- for their economic plight, they are unlikely to welcome a further transfer of political power from national capitals to the center. They think that this shift has already gone too far and needs to be reversed. Yet some further surrender of fiscal sovereignty must be part of any long-term plan to mend the euro system.
The problem is real, but not as insoluble as you might think. Curbs on public borrowing, as long as the issue of short- term flexibility can be dealt with, infringe on fiscal sovereignty in a relatively benign way...
Nonetheless, popular concerns about the drift of political power from Europe's nations to the EU's center are well-founded. New demands for central supervision must therefore be combined with a reversal of centrism in other areas. From now on, Europe should ask governments to surrender sovereignty only when strictly necessary. Starting now, voters must be talked to and heeded. Where integration has gone further than is necessary or wanted by voters, it should be rolled back.You might say this is little to ask. In fact it will represent a wholly new approach.
My previous column argued among other things that an orderly dismantling of the eurozone was almost impossible to imagine. A reader referred me to an article in the FT that I had missed which develops this point at greater length: Greek default within the euro is the only real option. It's by Robert Jenkins, an external member of the Bank of England's financial policy committee (writing in a personal capacity). Those who think it's time to start thinning out the eurozone should read it. Jenkins describes a six-step process. The last step is this:
6. Bank lending across the EU ceases. Economic activity halts.