Italy Seeks Political Union

As expected, Italy has joined the “United States of Europe” parade. And also as expected, some from Germany want no part of it. Let's start with Italy.

Italy's finance minister, Pier Carlo Padoan calls for ‘Political Union' to Save Euro. 

 Italy's finance minister has called for deeper eurozone integration in the aftermath of the Greek crisis, saying a move “straight towards political union” is the only way to ensure the survival of the common currency.

Pier Carlo Padoan's comments reflect how the tortured and dramatic negotiations that led to this month's deal on a third bailout of Greece have triggered a round of soul-searching about the future of monetary union across European capitals.

“The exit and therefore the end of irreversibility is now an option on the table. Let's not fool ourselves,” he said in an interview in his central Rome office.

Italy is calling for a wide set of measures — including the swift completion of banking union, the establishment of a common eurozone budget and the launch of a common unemployment insurance scheme — to reinforce the common currency. He said an elected eurozone parliament alongside the existing European Parliament and a European finance minister should also be considered.

“To have a full-fledged economic and monetary union, you need a fiscal union and you need a fiscal policy,” Mr Padoan said. “And this fiscal policy must respond to a parliament, and this parliament must be elected. Otherwise there is no accountability.”

Germany's “5 Wise Men” Argue for Grexit

In contrast to tighter integration, Germany's “5 Wise Men” say Let Debtor Nations Leave Euro. 

 Countries should be able to exit the euro as a “last resort” if they are unable to manage their debts, the German government's independent economic advisers say, in a sign of Berlin's hardening attitude towards propping up fellow members of the single currency.

The mere suggestion of a country leaving what was supposed to be an irreversible currency union had long been taboo. But Germany's finance minister, Wolfgang Schäuble, broke it two weeks ago by suggesting a possible five-year eurozone “timeout” for Greece.

“A permanently uncooperative member state should not be able to threaten the existence of the euro,” the economists said in a special report, published on Tuesday, calling for countries to exit the eurozone if it is necessary as an “utterly last resort”.

The five-member independent panel, known as the “wise men”, also argued that creditors should be forced to shoulder losses if states go bankrupt, encouraging them to scrutinize more closely the risks before they invest.

Special Report of the Council

Here's a link to the Executive Summary, in English. The Full Text is in German only. Here are a couple of key snips from the summary.