Big Brother Budgets Could Destroy The European Dream.

international | eu | opinion/analysis Saturday May 15, 2010 01:49 by Craig McInerney

Foreboding forecasts of a wave of financial instability consuming the Euro zone have prompted E.U Commission to take a drastic stance encompassing a potential inflammatory budget review process.

The fear of on an economic outbreak perpetrated by the “contagious “Greeks, and the foreboding forecasts of a wave of financial instability consuming the Euro zone have prompted E.U Commission to take a drastic stance encompassing a potential inflammatory budget review process.

The commission is advocating the implementation of a “peer review process”, where effectively national sovereign member states would submit their budgets for approval by the Commission. The review process would act as a preventive measure to ensure economic harmony and act as a defense against potentially destabilizing fiscal policy.If unharmonious policy was enacted it would have detrimental consequences to the valuation of the Euro and effectively devalue other member states economies, and in this lies the premise for the Commission’s actions.

The implication of this move could be potential shattering to the solidarity of the European Union. The emergence of a fractured European Union is a real possibility.

Take the hypotheses of an indebted member state in a position where its Government is unable to enacted tough austerity measures which are the perennial prerequisite of any current bailout package. The Euro zone bailout reserve will be forced to provide funds even though the Government is unable to meet the requirements of its lenders. The alternative; to refuse funding is utterly unpalatable. It would have a domino effect of instability on other member states, particularly in the strength of the Euro.

The Budget review process would try to act as a combatant to this happening in the first place, and would act as a progressive form of economic governance and undoubtedly would give the Commission the ability to pre-approve bailout countries budgets ensuring economic harmony.

The fundamental problem that may arise from this is that the tenure of any Government under the current climate is on shaky ground. In the case of a further bailout to a member state, there could very well be a rapid turnover of Government. The incoming Government will undoubtedly have to appease public opinion and undoubtedly dilute austere policies and in some cases abandon them. The consequences would be dire and other member states would undoubtedly call for harsh repercussions and in extreme cases expulsion from the Euro zone.

Olli Rehn, Europe’s economic and monetary affairs commissioner stated: “Coordination of fiscal policy has to be conducted in advance, in order to ensure that national budgets are consistent with the European dimension, that they don’t put at risk the stability of the other member states”

The dwarfing of sovereign fiscal autonomy is not new to member states, their very presence in the E.U is a commitment to a higher authority. However the national Budget is the ultimate in economic autonomy and the Big Brother Budget review process will inevitable be taken on the premise of “what is good for European economic harmony? “ and the needs of a domestic national economy will inevitably be marginalised.

Austere measures imposed by a national government are bitter pill for most to swallow, but the implementation by a supranational body of these measures with the primary goal of Euro zone stability, would be comparative to asking citizens to swallow a rugby ball, it wouldn’t fly and the backlash would range from protest, to calls for referendums on an exit of the Euro zone.

The complex between indebted member states wanting what’s best for them tempered by stable member states refusal to be weighed down by these reckless states may be the impetuous for a radical overhaul of the composition of the Euro zone. The creation of a fractured E.U is a distinct possibility with the relative solvent in one corner and fiscally defunct in the other. The Budget review process may be the catalyst to accelerate this dynamic and invariably bring about the beginning of the end of the European Dream.