I wrote a couple of months ago that it was important to watch the ongoing fiscal crisis in Europe for signs that the European Union is heading towards political union. Today there is a German newspaper report about how Germany is secretly devising plans to create an institution called the Berlin Club which if implemented may be a step towards political union.
Germans are tired of having to makeup the rules as they go to deal with countries with fiscal problems like Greece and tired of carrying the burden of bailouts. In response, German government officials are devising a plan to create a process that they hope fiscally-strained countries can go through to take care of their problems. The creation of the Berlin Club would be the centerpiece of the plan to come up with a process.
- According to the article, the Berlin Club would be an institution which would have the power to regulate how European countries who declare bankruptcy spend their money. This power would effectively enable the institution to have some control over the affairs of countries and would represent a loss of sovereignty for countries that become subject to the Berlin Club’s rules.
A major risk of having rules to seize the fiscal sovereignty of countries is that it may be seen as a too high of price for some countries to pay. Some countries may see dropping the Euro and reverting back to their national currency as a lesser price to pay since they do not have to surrender the fate of their country to an outside institution. Thus, the German’s plans could potentially be a step closer to political union in Europe or a step closure to fracturing the European Union.
The plan is still being developed by Germany, but the newspaper article suggests that Germany’s secret plans could lead to a European Union-wide institution instead of an institution whose primary constituents would be Germany and whoever else Germany wants to invite to be members of the club.
The complete article can be found at this link. It is recommended reading for those who are concerned about the prospects of Europe in the future.
