The IMF wants a central budget authority for the European Union: it wants the member nations of the EU to subordinate their sovereign budgetary duties to the demands of a “higher authority.” However, it wants that without the federalism that must accompany such a subordination.
Worse, the IMF claims—they’re serious about this, mind you—that everything would be all right. In answer to objections of nations like Germany, who wish to preserve their budgets and their sovereignty from the persistent demands of economically weaker nations, the IMF insists that such “risk sharing”
means that, at any point in time, countries experiencing better cyclical conditions support those at the other end of the spectrum; it does not mean the same country is always on the giving or receiving end[.]
Except, of course, that it means exactly that. The nations rimming the Mediterranean, for instance, have entirely different concepts of the role of government in men’s lives and even of the purpose of money than have, for instance, the nations of central Europe—Germany, e.g., and Poland, whose concepts are different yet from those of England (not a member of the euro zone, to their benefit) or France (who is a member). The risk transferors always will be the same, and those forced to accept the risk under the IMF’s scheme, also always will be the same.
The IMF says further:
A full-fledged budget at the euro-area level would allow for risk sharing both through revenues…and through spending.
Sound economies would be required, under the IMF’s scheme, to take on the risk the profligate economies are inflicting.
Unfortunately, the differences in fundamental principles make federalism across Europe a pipe dream. The impossibility of federalism means a central budget authority can only be a disaster for the perennially stronger economies, while doing nothing at all to help the weaker.
It isn’t necessary to go any farther than that, except to note an example of the IMF’s breathtaking…naiveté. They propose, for instance,
a “rainy day” fund that would distribute money to countries experiencing economic shocks. The IMF says that annual contributions of 1.5%-2.5% of the euro zone’s gross national product would have been sufficient to provide…shock absorbers….
A built-in, automatic bailout fund. No need for economic discipline by a government here. There are other hare-brained schemes in the IMF’s…suggestions…but they’re all variations on this idea of automatic bailouts for the needy countries.