“Countries must be able to generate sustainable growth and high employment without excessive imbalances. The euro area is not a nation-state where persistent cross-regional subsidies have sufficient popular support. Therefore, we cannot afford a situation where some regions run permanently large deficits vis-à-vis others.”The main thrust of the piece is that Draghi dismisses the option of a United States of Europe as well as the prospect of returning to the previous setup. Instead, Draghi focuses on a 'third way', a slightly vague proposition built upon combined economic and fiscal policies and greater financial oversight – again a picture which is likely to appeal to the traditional (ordo-liberal) German economic approach. Draghi sees the political and economic developments moving in tandem over time rather than through giant leaps and grand agreements.
“Yet citizens can be certain that three elements will remain constant. The ECB will do what is necessary to ensure price stability. It will remain independent. And it will always act within the limits of its mandate.”
There are a couple of key issues that Draghi fails to address:
- There is no real explanation of how his proposed 'third way' would address the internal eurozone imbalances he correctly identifies as a cause of the crisis, other than some loose talk of competitiveness, (i.e. there is no mention of fully-fledged fiscal union that goes down so badly in Germany).
- How will the eurozone find the time to make the piecemeal changes he suggests? Greater fiscal and financial oversight takes time to set up and organise. He also fails to mention the political/democratic implications of pooling greater economic powers at the eurozone level. Again no mention of potential ECB spending or bailouts to buy time for these changes.
- Ignoring these issues makes the prospect of a eurozone solution without a political union sound easy, but in reality ensuring that conditions are enforced and that money is well spent may well require such a set up. This also avoids the thorny questions of democratic accountability which follow on from political union.