European Union Needs More Power

Since 54% of the 483 million-member European Union (EU) come from Germany, France, Britain and Italy, too much is being made of the Euro Crisis, as only 2% of the EU population lives in Greece, 2% in Portugal, and less than 1% in Ireland. The Euro Crisis simply does not directly affect 95% of the European Union.

Britain, one of three to opt out of the Euro, with Denmark and Sweden, is now smirking on the sidelines and hyping the crisis, as the German Bank tries to craft bailouts for Greece, Portugal and Ireland. But British criticism of the Euro-zone is not the answer. The Euro instead needs more, not less power. What the UK could do to help and restore Euro confidence is to boldly abandon the Pound and adopt the Euro.

Here, in America, many are unable to follow the EU story, since the organization did not even exist when they were in school. The EU had its origins with the European Coal and Steel Community (ECSC) (1952), and the Common Market, also known as the European Economic Community (EEC) (1957). The EEC later became the European Community (EC) (1967), and finally the European Union (1992), which now has 27 member states.

The EU established an Economic and Monetary Union, which opened a European Central Bank in Frankfurt (1998), and circulated a Euro Currency (2002). Britain, Denmark and Sweden opted out of the Euro. The Central Bank controls Euro monetary policy and affects national spending, since Euro-zone states are now unable to print their own currencies and must make up for budget shortfalls by borrowing. The EU adopted a Stability and Growth Pact to limit national budget deficits, but Greece, Ireland and Portugal failed to comply. With no money to print, and none to borrow at reasonable rates, a crisis developed.

A European solution is not as easy as the one implemented in the U.S. during the recent financial crisis, where Congress and Federal Reserve Bank stopped things from spinning out of control. Although EU institutions look like those in the U.S., since they have an executive in Brussels (Commission and Council of Ministers), a 732-member Parliament in Strasbourg, and a Court of Justice, in Luxembourg, they are not as strong as their U.S. counterparts. The EU is not really a political union able to make its own decisions, but rather an organization which is dictated to by its 27 member states. The EU Parliament has no general lawmaking power and cannot tax and spend. All the EU can do is issue directives to member states and ask national governments to implement EU policy.

Some say the EU will never become the USA of Europe, but it’s just a matter of time. It took the U.S. 172 years to assemble 50 states in one union across North America, and it will take many years to complete the European Union picture.

For now, instead of Britain, Denmark and Sweden resisting the Euro currency, as they have in the past, they should courageously convert to it and give the EU more power. All 27 member-states should grant their EU institutions the authority they need to keep their currency strong, so they can correct the budgetary problems in the member states, such as Greece, Portugal and Ireland.

Euro Currency Will Survive Crisis

The financial crisis in Greece, Ireland and Portugal would have been strictly national in decades past, but since the circulation of the Euro currency, the matter is now a European Union problem.

The European Union (EU) began when six nations formed the European Economic Community (1957). [1] After Britain, Denmark and Ireland joined (1973), Greece, Spain, and Portugal became members (1980s). Once the EU replaced the EC (1992), Austria, Sweden and Finland were added (1995), followed by 10 largely eastern European countries (2004). [2] Most recently, Romania and Bulgaria pushed EU membership up from 25 to 27 states (2007).

Unlike the U.S., where adopting of the U.S. Dollar is a condition to statehood, membership in the EU, and the use of the Euro, are separate matters. Three EU members opted out of the Euro. Britain stayed with the Pound Sterling, Denmark turned down the Euro in a referendum (2000), and Sweden also voted no (2003).

Britain feared the European Central Bank in Frankfurt would set interest rates, and their own Bank of England would lose control. They felt they could maintain better economic stability, lower inflation, and less unemployment, by continuing with the Pound.

Sweden’s vote against the Euro was based on a fear recessions would cause big states like Germany to take over their economy, and they would lose their welfare system. The issue was so hot Foreign Minister Lindh was assassinated for promoting the Euro.

Today, even though the EU has 27 members, only 17 have adopted the Euro, as their currency. [3] While five European states, that are not EU members, also use the currency, [4] there remain 10 EU nations that have not yet converted. Seven however agreed, when they joined the EU, to replace their currencies over time. [5]

Despite the recent crisis in Greece, Portugal and Ireland, it is just a matter of time before the Euro is adopted throughout Europe. Once all of those admitted to the European Union in 2004 and 2007 start using the Euro, more nations will join the EU, such as Macedonia, Croatia Serbia, Bosnia, Albania and Iceland, and they too will adopt the currency. Those not seeking EU membership, like Norway Liechtenstein and Switzerland will soon become isolated as to their money, and pressure will build to accept it, or people will simply start using Euros as a matter of fact.

The first near decade of the Euro has been a major success. Along with the U.S. Dollar, it is now the world’s most valued currency. One can reasonably predict that after the EU solves the crisis in Greece, Portugal and Ireland, the Euro will only emerge even stronger than it was before the recent economic troubles began.

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[1] Belgium, France, Luxembourg, Netherlands, Germany and Italy

[2] Poland, Hungary, Czech Rep., Slovakia, Estonia, Latvia, Lithuania, Slovenia, Malta and Cyprus

[3] Austria, Germany, Luxembourg, Spain, Belgium, Greece, Netherlands, Finland, Ireland, Portugal, France, Italy, Slovenia, Malta, Cyprus, Slovakia, Estonia

[4] Andorra, Monaco, San Marino, Montenegro, Kosovo

[5] Czech Rep. (koruna), Poland (zloty), Latvia (lats), Hungary (forint), Lithuania (litas), Romania (leu) and Bulgaria (lev)