Eurozone Dystopia

Eurozone Dystopia

Groupthink and Denial on a Grand Scale

William Mitchell

Eurozone Dystopia traces the origin of the Eurozone and shows how the historical Franco-German rivalry combined with the growing dominance of neo-liberal economic thinking to create a monetary system that was deeply flawed and destined to fail. It argues that the political class in Europe is trapped in a destructive groupthink which prevents it from seeing their own policy failures. Millions are unemployed as a result and the member states are caught in a cycle of persistent stagnation and rising social instability.

Chapter 20: The federal solution

William Mitchell

Subjects: economics and finance, political economy, post-keynesian economics, politics and public policy, european politics and policy, political economy


An obvious economic solution for the Eurozone is to bring the fiscal policy responsibilities (spending and taxation) in line with the monetary issuing capacity and allow the federal fiscal authority to run deficits commensurate with the non-government spending gap. The necessity of this alignment was recognised by the Werner Committee in 1970 and the MacDougall Study Group in 1977 but was ignored, for ideological reasons, by the Delors Committee in 1989. Reflecting on our earlier discussion, the Werner Report concluded that for EMU cohesion ‘transfers of responsibility from the national to the Community plane will be essential’ (Werner Report, 1970: 10). Moreover, the: . . . transfer to the Community level of the powers exercised hitherto by national authorities will go hand in hand with the transfer of a corresponding Parliamentary responsibility from the national plane to that of the Community. The centre of decision of economic policy will be politically responsible to a European Parliament. (p. 11) In a similar vein, the MacDougall Report (1977: 12) concluded in relation to the need for a mechanism to cushion ‘short-term and cyclical fluctuations’ that ‘because the Community budget is so relatively very small there is no such mechanism in operation on any significant scale, as between member countries, and this is an important reason why in the present circumstances monetary union is impracticable.’

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