The weekend agreement on EU cooperation didn't even survive until Monday lunchtime, as Germany moved to follow Ireland and guarantee its savers' cash. It makes me think that the suggestions for some new European body to intervene in financial markets and stem future crises won't actually have much traction.
Europe's economies are diverse, and as the European Central Bank has discovered, policy that is right for one can be catastrophically wrong for others. Forcing different countries to accept the decisions of a group of Euro–bureaucrats is not necessarily a solution to our problems. National interest influence how such bodies are constructed, who has the power over decision-making, even where it is sited.
The European emissions trading system is an example. It's a good idea in principle, using market mechanisms to give everyone an incentive to work more cleanly. But in reality it's more of a horse-trading system. The national bargaining has made it a dysfunctional mess. It galls me, but we might be better with a straightforward carbon tax.
Maybe we do need some new framework, but it should be based on cooperation, not control. It is inept regulation that caused this crisis in the first place — monetary authorities printing money to fuel a boom, regulators looking the other way while banks borrowed thirty times their assets. The only long–term cure is sound monetary policy and simple, clear rules. I fear that the European Union is unlikely to deliver us either of those things soon.
