Soros on the European Union’s woes

Hey all,

 

George Soros is a man that understands economics. Here are some comments he made about what is going on in the EU and my replies which were geared toward putting these events in the context of global rule of law and the challenges it presents.

 

“Doubts about sovereign debt in Europe have revolved around the euro to such an extent that some now question whether the single currency can survive. But the euro was an incomplete currency from the outset. The Maastricht Treaty established a monetary union without a political union – a common central bank, but no common treasury. Its architects were aware of this deficiency, but other flaws in their design became apparent only after the crash of 2008.

Instead of the convergence prescribed by the Maastricht Treaty, the radical narrowing of interest-rate differentials generated divergences in economic performance. Countries like Spain, Greece, and Ireland developed real-estate bubbles, grew faster, and developed trade deficits with the rest of the eurozone, while Germany – weighed down by the costs of reunification – reined in its labor costs, became more competitive and developed a chronic trade surplus.”

 

This is a brilliant summary of what happened to the EU. Lack of Federal Symmetry (under the EU Constitution of 2004) guarantees this outcome. You cannot implement a fundamental law across States without a uniform, symmetric application of Rule of Law; that is, public policy across the Union must be consistent and if for one State, then for all. This notion of symmetry is a fundamental fabric of federalist ideas. What was really diverging here was general public policy and natural economic activity; that is, law and economics. This is a crucial confirmation of what I’ve discussed before regarding General Federalism (kirkomrik.wordpress.com).

 

“European authorities were slow to react, because member countries held radically different views.

Indeed, as eurozone members’ inability to print their own money effectively relegated them to the status of less-developed countries that must borrow in a foreign currency, risk premiums widened accordingly.”

 

… because of incongruity between law and economics and the need for financing of public projects and programs – lack of symmetry in public policy across all states of the EU.

 

– kk

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