Economist Thomas Piketty with Portuguese Socialist leader Antonio Costa. Demotix/Thomas Meyer. All rights reserved.The European Union (EU) is morphing into a euro zone; in a sense, it is shrinking rather than expanding. A couple of western countries are not even part of it. Iceland has changed its mind and entry negotiations have stalled. Recent YouGov polls point to a possible Brexit.
The common currency has proved a massive headache for everyone in recent years. Non-euro zone countries don’t want to get involved: the euro threatens to bring their economies into chaos with no chance of turning back. Once you’re in, that’s it. If it all goes pear-shaped, tough. The EU’s embrace feels like a straightjacket, especially with the Eurogroup administering electroshocks to numb the effects of austerity.
How did we get to this point? The EU was supposed to bring about a progressive transformation. Has it expanded too quickly? And if so, is there any way it can be shrunk and then gradually rebuilt and made more democratic - with a more logical fiscal policy outdoing the rigid Stability pact?
The Brexit question has helped push such issues to the fore. Reasons for it are economic; and cultural too. “[In] a nation that is taught by Shakespeare to mock foreign accents, being told to love Europe by non-natives doesn’t work,” wrote Denis MacShane, a former Labour minister of Europe.
Turn back the clock a few months. Wolfgang Schäuble argued that Greece coming out of the euro would avert the crisis. Disastrous, many protested. Indeed, Schäuble himself thought it was unpalatable. Grexit brings to mind Brexit; and yet, they are not the same.
Britain never adopted the euro and never will, or at least for many years to come. This is a crucial aspect: Brexit wouldn’t be a dreadful blow to the EU in the way Grexit could’ve been. The UK could enter the European Economic Area or maybe not, keeping close trading ties either way.
By never joining the common currency, Britain always kept open for itself an invaluable option: the ability to wriggle out of the EU, if it ever wanted to. Why not? As it stands, the EU is best kept on its toes.
If the theories of the economist Thomas Piketty are ever to be implemented, then the EU and its lifeblood currency could improve. They have to; criticisms are coming in from all angles, including the ever louder but not illogical “Lexit”.
Consider this. After years of Brexit, Britain could re-join a better union and the euro – an unimaginable scenario, as yet. The French scholar said current regressive issues can be partly solved by a new euro zone parliament. There’s hope in this: Brexit wouldn’t have to be permanent.
“The [Stability] pact is a true catastrophe. Setting fixed deficit rules for the future cannot work. You can’t solve debt problems with automatic rules that are always applied in the same way, regardless of differences in economic conditions,” said Piketty in an interview with Der Spiegel a few months ago. This shows the intrinsic weakness of the EU – rigidity.
“I propose a European parliament for the euro zone that would consist of members of the national parliaments. … These [representatives] would then vote democratically on how high the deficit could be in the euro zone,” explained the French scholar. Aha.
Piketty kept his sharpest remarks until last: “This type of parliament would have saved less in recent years, and would have instead spent more on growth and fighting unemployment,” thus arguing that “if we have a common currency, at some point we have to accept that we also spend money together.”
Austerity hinders investment and progress. A Brexit shock would spur the EU to look closer at its own policies instead of relying on quantitative easing to cover everything up. The UK breaking away – a humbling lesson. If learned, inclusion and expansion on a new flexible basis could then secure a more stable future.