Groupthink and Denial on a Grand Scale
Chapter 20: The federal solution
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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