'Stronger union' needed for euro
Finance chiefs and experts mostly agree that Europe needs deeper political union to preserve the troubled euro - even though persistent national identities made the prospect politically unlikely in the near future.
Speakers at the annual Ambrosetti forum in Cernobbio, Italy, laboured over the emerging dilemma that monetary union struggles without central budget control, but member nations want independence - and the imbalances that result could lead to a calamitous break-up of the euro, which no-one wants either, especially since it could send the world economy into a tailspin.
Unless Europeans agree "to complete economic and monetary union ... with a fiscal union, with a strong governance, with a feeling that some political decision should be adopted in common by those who are sharing the single currency, we will not succeed", said Joaquin Almunia, a vice president of the EU commission.
While most governments bristle at this, Spanish finance minister Elena Salgado agreed, saying she supported "more fiscal integration" and noting that her country was in any case deeply dependent on trade with the rest of the EU.
The current structure depends on national governments acting in concert when needed. But instead, said Italian economist Mario Monti, governments were becoming increasingly "short-termist" - preferring to pander to voters even if the result is dysfunction on the European level.
The most acute example of this has been repeated dithering over rescue packages for Greece and other economies on the brink of insolvency in the past two years. The emerging pattern has been rescue packages agreed upon at the last possible moment, after prolonged hesitation and public acrimony sent European and global markets careening.
That occurred with the recent Greek bailout agreement. After months of back and forth with the Greek government, eurozone leaders finally agreed in July to grant the country a second massive aid package.
But sealing a final deal on the rescue loans has been complicated by a protracted dispute over a demand from Finland to get collateral to secure its contributions, which has triggered similar requests from at least four other countries. That debate clashes with European leaders' insistence that Greece would never be allowed to default on its debts.
Some of the speakers in Cernobbio noted that the indebted nations might benefit from a return to their own currency, which they could then devalue, reducing the size of the debt, stimulating growth through exports and forcing austerity through inflation.
But that was a dangerous scenario, warned New York University economist Nuriel Roubini. "The question is whether the Germans are realising the benefits of avoiding" a eurozone break-up, he said. "This is a key decision determining whether there's going to be survival of the eurozone or not."