Posted by: Dirk | June 12, 2013

JP Morgan points out “features which appear to be unsuited to further integration”

EUobserver reports on JP Morgan’s assessment of the euro zone problems:

“In the early days of the crisis, it was thought that these national legacy problems were largely economic: over-levered sovereigns, banks and households, internal real exchange rate misalignments, and structural rigidities. But, over time it has become clear that there are also national legacy problems of a political nature. The constitutions and political settlements in the southern periphery, put in place in the aftermath of the fall of fascism, have a number of features which appear to be unsuited to further integration in the region. When German politicians and policymakers talk of a decade-long process of adjustment, they likely have in mind the need for both economic and political reform.” [Emphasis added]

The text does not continue to make explicit the “features which appear to be unsuited to further integration in the region”. I guess that to all bankers involved it is clear that bloated welfare states, regulations of financial and labour markets and high taxes on business and higher incomes are meant. Between the lines you could also read that in fascist dictatorships “economic and political reform” is easier to implement. Now, with democracy, that is a bit harder.

While I agree that no nation is perfect and that you can find some institutional problems in every country’s constitution and political settlements, the paragraph written by JP Morgan seems to be quite insensitive. There is a lack of respect for democratic institutions and the will of the people expressed through them. If countries like Spain and Greece can change, that change will come from the inside. Imposing rules from the outside is very likely to fail if those countries did not agree on it before. And then, of course, there is the Treaty establishing a Constitution for Europe. Its preamble reads:

BELIEVING that Europe, reunited after bitter experiences, intends to continue along the path of civilisation, progress and prosperity, for the good of all its inhabitants, including the weakest and most deprived; that it wishes to remain a continent open to culture, learning and social progress; and that it wishes to deepen the democratic and transparent nature of its public life, and to strive for peace, justice and solidarity throughout the world.


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