For anyone not quite convinced by the idea that Germany/the Bundesbank is the main barrier to a solution to the European crisis, and further integration, due to their opposition to debt mutualisation, David Mackie - chief European economist at JPMorgan - has a different story to tell.
Mackie seems to be concerned that constituent members of the eurozone are somehow being held to lower standards of behaviour than the non-sovereign institutions. Under such a narrative, Spain is the real barrier to further consolidation, unwilling to take the steps that are part-and-parcel of further integration..
| “Spain’s reluctance to sign a Memorandum of Understanding regarding EFSF bond market intervention is very troubling. Everyone wants the ECB to do all that it can to save the Euro area. Shouldn’t we expect Spain to do all that it can, by signing an MoU for example? Spain’s recent softening of its stance is encouraging, but Prime Minister Rajoy continues to talk of doing “What I consider to be in the general interest of Spaniards”. Weidmann asks if countries like Spain have difficulty asking for EFSF intervention, how are they ever going to cede the huge amount of sovereignty that needs to be ceded in order to make a fiscal and banking union work. He is concerned that steps on burden sharing are irreversible, but that steps on governance are easily reversed." |
Of course, one could make the argument that Spain has been paying the price for years now - and Germany still reaps the benefits of a cheap currency, a boost for its export-led economic model. There is no such thing as good guys and bad guys in this mess.
In addition, Mackie makes a case for Draghi not being as opposed to Weidmann as it may seem at first. They both want action by governments to repair monetary policy transmission channels: one is just a bit more trusting than the other. While under this analysis Draghi may come across as a touch naive, he is also the only one of the two offering a constructive solution:
| “Draghi seems willing to believe that the current structure of conditionality will work; Weidmann seems more skeptical. While Draghi is seeking to avoid both the quagmire of fiscal dominance and the cliff of EMU breakup, it is not clear to us what policies Weidmann would advocate to prevent the latter. We are unsure what Weidmann’s alternative is: perhaps he wants the quantum leap to a banking and fiscal union to be taken much more quickly. By the way, we are also unsure what happens if Draghi’s trust in the fiscal authorities is unwarranted.” |