Europe Debt Crisis Could Lead to More EU Financial Control

Posted September 6th, 2011 at 1:11 pm (UTC-5)
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Some European leaders are saying that the difficulty in solving the continent’s debt woes may eventually lead to the creation of a more centralized government to oversee the financial affairs of the 17-nation bloc that uses the euro currency.

As it stands now, each of the countries retains a veto power over continent-wide decisions about financial assistance for individual nations, such as the second bailout for financially troubled Greece in as many years. Some leaders are suggesting that a new central financial authority needs to be created to rule on taxation, budgets and other financial issues of individual countries, to effectively create a United States of Europe.

In a speech this week, European Union Council president Herman Van Rompuy said that in dealing with the debt contagion, leaders have had to “invent everything in the midst of a crisis.” He said the euro “has never had the infrastructure it requires” for its successful use.

He predicted that the current debt crisis will lead to further European integration.

But voters in several countries have voiced fears about a centralized continental government.

Some people living in financially strong countries, such as Germany and Finland, have said they do not want their taxes used to bail out governments that have borrowed too much and now face difficulties in paying back their debts. Some in financially weaker countries have been reluctant to give up power to spend their tax revenues as they see fit.

But Nobel Prize-winning economist Nouriel Roubini said that either Europe moves toward a political union or an “eventual disintegration” will occur. Other financial and political leaders have voiced similar sentiments in recent days.

The continent’s fragmented approach to handling the debt contagion will be on display this week.

On Wednesday, Germany’s top court is expected to rule on the constitutional legality of Germany’s participation in the May 2010 Greek bailout. Then, on Thursday, Finland plans to disclose what terms it wants to impose for its help on the second Athens bailout sanctioned in July, conditions that other countries may also seek.