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Dublin: 6°C Wednesday 26 January 2022

Column: We need big changes to the eurozone – or we need to leave

The eurozone is designed to help its strongest economies – and if this doesn’t change, Ireland needs out, writes Mike Hall.

Mike Hall

THE PROBLEM WITH the Lisbon Treaty, and the entire attitude of the majority political classes throughout the Eurozone is summed up in the famous slogan “Yes to jobs”.

The problem being that it was a monstrous lie. There were and are absolutely no policies or commitment to anywhere near full employment. What we have instead is a race to the bottom, ‘winner take all’ structure. A structure designed into the fabric of the monetary union. And there seems not the slightest interest in addressing this, even whilst, as it inevitably would, threaten to blow apart the whole project.

A properly functioning monetary union (which we demonstrably do not have) cannot work without significant elements of fiscal and political union. Nor can it work without a clear recognition that there are inherent and largely immutable economic and productivity imbalances between countries, just as there are now such imbalances between regions within those countries.

This means that just as, say, the wellbeing of citizens of Co Kerry matters as much as those of Dublin, the wellbeing of citizens of ‘peripheral’ or smaller states must matter just as much as those of far more industrialised Germany. On the agreed basis that the ‘whole’ is far more prosperous than the sum of otherwise separate parts.

Different activities, whilst equally important to the whole, have different economic value in pure monetary terms. Is it sensible, feasible or even desirable that each region in Ireland or each state with the Eurozone become carbon copies of each other down to the last detail and cent of economic activity? No, it isn’t, it’s insane.

Yet that is the underlying assumption of how the Eurozone was intended to ‘converge’. We see the results. The inherent imbalances became amplified. Those states least able to ‘fit’ – become essentially economic activity copies of dominant states like Germany – are being punished and left behind to rot with the debilitating disease of high unemployment and austerity.

‘This would not be acceptable behaviour’

This would not be acceptable behaviour toward regions within our own country. And it should not be within Eurozone states. Yet, such mathematically inconsistent nonsense as an ever more stringent ‘stability and growth pact’ convergence is all that’s being – highly undemocratically – discussed in the ‘core’ states.

For a monetary union to work, it must have harmonisation in public services spending, and at least aggregate elements of tax. But it must also have a clear commitment to fiscal transfers wherever they are needed. It must also have a clear strategy and commitment to (near) full employment in all states. This latter is our key guarantee that no one gets left behind.

It’s perfectly doable, albeit not remotely within the idiotic, ideologically disguised charter for the rich (only), that passes for mainstream macroeconomic ‘thinking’ today. Specifically, we would need a (near minimum wage) Job Guarantee scheme, available to every eurozone citizen that becomes unemployed.

It can be funded, debt-free, by a properly functioning central bank – the issuer of currency (ECB) – at no cost to citizens. When there are available idle resources, unemployed, to be hired, money ‘creation’ for this purpose does not cause excess inflation. When the business cycle picks up again, Job Guarantee workers will be drawn back into private sector jobs by the new vancies and higher wages offered, and net money creation is reduced.

The bottom line is, that if a monetary union cannot underpin it’s social purpose with robust guarantees of a reasonable wage for all, it will fail, sooner or later.

Ireland should be putting forward such proposals urgently to the ‘core’. And if the ‘core’ are not interested, as now, Ireland should leave the Euro & pursue its own transformation of past failed economics thinking toward fulfilling a proper social purpose. And yes, a euro exit is pefectly possible, defaulting on the ‘odious’ debts that it should never have been forced to bear alone for the EMU’s collective failure.

About the author:

Mike Hall

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