Reforming EU governance: political problems of the Greek financial crisis

The other argument driving governance reform in relation to EU authority over sovereign fiscal policy is that without a unitary authority European politics might again return to trade boycotts, migration driven xenophobia, and types of social and economic tensions that have led to the wars and ethnic cleansing of the past. The overcoming of these practices was a central rationale for the development of the EU and eurozone.

The argument was that as long as states could move in a free trade system, Europe's extraordinarily diverse political economy could benefit from 'internal' trade and protection. Financial devaluations and positive adjustments in wages and social welfare provisions would emerge overtime while states could maintain their distinctive autonomies and political cultures. This in turn would lead to increasing prosperity and decreasing hostilities.

The current situation, especially resentment from strong economies in bailing out weak economies and in the flow of large subsidies from high-performing to low-performing states within the eurozone to finance sovereign debts, threatens the very existence of the union if allowed to continue or be continually repeated.

If there is to be an EU, then monetary and fiscal policy surely need to be under one umbrella. Just as the Single European Act was necessary to enforce free trade, reform is now required to deliver a single EU economic system. While many states should be concerned at what impact an EU with control over a nation's domestic economy will have on nationhood and sovereignty, the alternatives may be devolution of the EU Consensus in the EU, particularly over the Greek bailout, is already deteriorating. Britain and Slovakia have already said they wont contribute but the German's will pay whatever is required to protect the regional economy. They will however want significant assurances for domestic reform in Greece (so much for Greek sovereignty). Without a true fiscal union, what will stop another Greek crisis? The question that needs to be asked is what are the consequences of a genuine EU monetary and fiscal union versus the consequences of retaining control only over monetary policy?

There are ominous signs that trust in the EU in faltering and the politics of euroscepticism are rapidly returning. While the current Greek bailout may solve some of Europe's financial problems, the larger issue of the future of the EU remains. Does it reform and take control of sovereign economies, does it devolve under the weight of the contradictions of neo-liberalism or does it maintain the status quo and wait for the next fiscal crisis? Inaction is hardly an insightful economic or political response.