By Preston Cooper
I apologize for not being on Red Slate during the past several days. The reason for my absence was a conference on financial relationships between the US and Italy in Venice, which I was fortunate enough to attend. One of the principal issues discussed over a plate of pasta and soporific Italian wine was the impending Eurozone crisis brought on by irresponsible budgeting and regulation by several of the currency zone's members, such as Italy and Greece.
In the coming months, the countries of the Eurozone will have to decide whether to centralize several aspects of financial regulation such as deposit insurance and currency supervision. If they want the Euro to survive, this is pretty much their only option. When the actions of a government in one country, such as Greece, bear on the state of all other countries which share the currency, there is a big problem, as those other countries have no control over Greece's actions. Greece could, and will, drive the Euro into the ground, with the rest of the continent powerless to stop it.
The other option, of course, is to dismantle the Euro entirely. When Greece returns to the drachma and Italy to the lira, their economies will undergo a fair amount of tumult; however, it is impossible to predict just how much their domestic crises will bleed into the other EU countries. Eventually the former Eurozone will stabilize; but the continent will have lost the advantage of a single, strong currency, which has mobilized Second World countries such as Slovakia and Latvia to whip their economies into shape for the chance of joining it. It would be a shame to lose the Euro, seeing how far it has come.
Centralization, then, is the best way forward. As a conservative, I am skeptical of centralized regulation, but a single currency warrants it. There is a reason why the US has a Federal Reserve (albeit an over-empowered one) rather than fifty State Reserves. Fifty different economies, all regulating the dollar with little coordination between them, wouldn't work in America, and there's no reason to think it will work in the Eurozone.
Europe must establish a single deposit insurer, a single banking supervisor, a single currency regulator, and expand the powers of its existing central bank. The ECB should issue a "Euro-bond" to finance the deficits of the Eurozone's seventeen countries. And most importantly, each nation must submit its annual budget to a centralized council for approval. Irresponsible budgeting will not be tolerated.
For the Eurozone, it's all or nothing.