Steve Chiotakis: Today European finance ministers meeting in Brussels failed to come up with a plan to force countries to live within their means. One plan on the table — that’s been pushed by Germany and France — is developing a finance team that would police national budgets around the eurozone.
Our Economy 4.0 series looks at how the economy could better serve more people. And this morning, Marketplace’s David Brancaccio wonders what these financial “enforcers” might look like. Hey David.
David Brancaccio: Good morning.
Chiotakis: What is it, a squad of budget police? Is that what it is?
Brancaccio: In a way, yeah. A SWAT team with green eye shades who can boss countries around, like maybe the International Monetary Fund does in the developing world. They can say, ‘Hey Italy, hey Spain, you want the financial security courtesy of the European Union? Then you need to have these budget cops looking over your shoulders that you keep a lid on government spending.’
Chiotakis: Now this is a move, David, toward centralizing Europe’s budget process, right? How would this solve Europe’s problems?
Brancaccio: So if these budget police could make sure that all of Europe is prudent, careful, not too much in debt, then maybe powerful German politicians might change their minds about how Europe’s central bank acts in an emergency. Maybe they’d finally be willing to let the ECB print tons of money, which could, once and for all, calm down bond investors.
Chiotakis: Would it work?
Brancaccio: Maybe. But here’s the problem: So these budget police whips everybody into line with austerity — what happens then to economy growth, you have to ask yourself.
Mark Blyth, a political scientist at Brown University, puts it this way.
Mark Blyth: If you insist on slashing the only part of the economy which is still spending, it doesn’t work.
Chiotakis: Well then there’s the question, David, about whether Europe actually has the gumption to give up sovereignty like this. I mean, in effect, some of that sovereignty would go to powerful Germany, right?
Brancaccio: You got that right. They have this summit coming up in about a week and a half, the EU does, and we’ll see how far they’re willing to go. But listen to Matthias Matthijs, who teaches at both Johns Hopkins and American University. He says setting up a budget police like this is really at the heart of all politics.
Matthias Matthijs: If you take the first class in politics in college, they’ll tell you politics is about who gets what, when and how. And this is what it’s about. So I mean, I just don’t quite see how 17 countries can agree on what means good spending or good taxation.
Of course, a good financial crisis, Steve, can change old thinking. Who was it, the Polish foreign minister this week saying, “I fear German power less than I’m beginning to fear German inactivity.” Can you believe it?
Chiotakis: Yeah, really. Marketplace’s David Brancaccio with our Economy 4.0. David, thanks.
Brancaccio: You bet.
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