We must be grateful to Mario Draghi, not so much for monetary policies pursued by the ECB (on which, however, everyone will have his views), but for the extraordinary clarity with which illustrates the historical moment that is experiencing European Union .

In the intellectual wasteland in which we are consuming the epic story of our continent, addresses of Draghi, but you could say the same about many of his fellow central bankers, have the advantage of raising the level of debate that, without these contributions, it would be really miserable, with politicians who are trying to negotiate a few Euros to satisfy their hunger for consensus and public opinion, exhausted by the crisis, for which Europe is now a mainly monetary issue.

Therefore, we must be grateful to Mario Draghi, who in a recent public reading at the Harvard Kennedy School in Cambridge explained with rare precision this question: Europe’s pursuit of “a more perfect Union”

“Europe is currently engaged in a far-reaching process of reform – says Draghi -. Many of those reforms are taking place within the Member States of the European Union, to make their public finances more sustainable; to make their economies more competitive; and to strengthen the balance sheets of their domestic banks. But there is also an important stream of reforms taking place at the European level – the counterpart of what you call the federal level here in the US. New rules and institutions are being created that will change the relationship between the Union and the Member States”-

The preamble of the Treaties, Draghi says, makes “ever closer union” a goal of the EU. For some people, this creates anxiety. It seems to promise an inexorable movement towards a future super-state. Many Europeans, with different national histories and cultures, feel that they are not ready for that

But behind this anxiety, said Draghi, lurks a misunderstanding.

“The agenda facing Europe today – he said – is not adequately captured by the phrase “ever closer union”. In my view, it is better encapsulated by wording borrowed from the Constitution of the United States: the establishment of a “more perfect union”.

What does this mean?

“I mean that we are “perfecting” something that has already begun – namely, the economic and monetary union that was launched in 1999. Policy-makers are following through the consequences of the decision to create a genuine single market supported by a single currency”.

Consequences, of course, European politicians have not fully assessed.

Because if they did, they would know two things that Draghi, very effectively, recalls:

1) “A single market necessarily has political implications, in which a partial sharing of of individual and national sovereignty can be the best means to preserve their sovereignty.” It may seem a contradiction, but has its own logic.

2) “I will explain how the concepts of banking union and a strengthened fiscal setup are supportive of the single market and the single currency.”

Let’s start from the first point. “To understand the EU and the euro area – he says – you have to appreciate the difference between a free trade area and a true single market. A free trade area is a partial and reversible arrangement. A single market, by contrast, is a universal and permanent union. This is a distinction with fundamental implications.”

“Because a single market is universal and permanent, governments and parliaments forfeit, both in principle and by Treaty, the ability to reinstate border controls. This means that, unlike
in a free trade area, they cannot act alone to protect their constituents from unfair or unlawful competition from abroad.”

“So while a free trade area can be managed through intergovernmental cooperation, a single market requires a supranational organisation”.

“There has to be a judiciary with the power to enforce competition law at the level of the market. In Europe, this authority is devolved to the European Commission and the European Court of Justice “. Since the time of CECA, I remember it. It was in those years that he was born the intuition that European political union would necessarily be passed by the economy.

“If there is a judiciary, there naturally has to be a legislature, to write the law enforced by the judiciary. In Europe, the EU Council and the European Parliament jointly perform this role.”

Finally, “if there is a legislature and a judiciary, then there also has to be an executive able to implement their decisions. Here again, in Europe, the European Commission is entrusted

with executive responsibility”.

“This is what I mean when I observe that a single market has political implications,” said Draghi. That is to say that the Single Market generates, by its very nature, supranational bodies who are called to adjust it.

The problem, says Draghi, is “what degree of authority should be transferred to the supranational level”, ie how much sovereignty need to be shared.” But to answer, we need a little bit of political philosophy.

Draghi remember that one way to consider the nature of sovereignty is “normative”, namely that historically linked to the early absolutist States interpreted by the philosophy of Jean Bodin in the sixteenth century. “In this sense, sovereignty is defined in relation to the rights: the right to declare war and treat the conditions of the peace, to raise taxes, to mint money and to judge in the last resort.”

But there is another way of defining the sovereignty that Draghi calls “positive sovereignty”. In this sense, Draghi says remembering the philosophy of John Locke, “sovereignty relate to the ability to deliver the essential services that people expect from the government.” “A sovereign that is not capable of effectively discharging its mandate would be sovereign only in name.”

Needless to say, “I see this positive view as essentially the right way to think about sovereignty”.

“Such an approach moves us away from a zero-sum view of sovereignty as power, where one body loses sovereignty and another gains it. Instead, by placing the needs of citizens at the
centre, it allows us to view sovereignty in terms of outcomes – and this can be positive-sum.”

It will seem very abstract, but it is not. “This way of thinking is already embedded in the Eu Treaty under the principle of subsidiarity”. This provides that the powers can not be transferred to the EU level until an action is proved more effective than it is at the national level. ”

In other words, “puts the emphasis on the effectiveness of policy”, not the person who exercises it.

It is this logic led to the selection of the single currency, in order to “maximize the potential gains for member states that form a single market.”

The arguments in support of this thesis are twofold:

1) the desirability of a single means of payment and a unit of account. “A single currency is not just for business, but it is useful to eliminate currency conversion costs and increase price transparency”;

2) The second argument is what puts the index on the need for fair competition in the common market. “In a system of floating exchange rates individual governments may be tempted to manipulate their currency to pursue “beggar thy neighbour” policies, which constitutes a distortion of competition. An economy that increases productivity and competitiveness can be deprived of benifits because of currency depreciation in competing country. ” That’s why Treaty that founded the EU requires “that each state consider the exchange rate as a matter of common interest.”

The consequence is that in a common market “the fixed exchange rate is an important component of fair competition. In this sense, the single currency has become a tool to maximize the benefits of the single market. ” Not to mention, he notes, that the transfer of monetary sovereignty – in the sense that we have seen subsidiary – “paradoxically ensures greater national influence,” as even the smaller states have a say, the Eurosystem, with the greatest. The well-known positive-sum game.

All clear? So you will also understand Draghi’s endorsement for the Banking Union Bank.

According to Draghi with the Banking Union national states will be much more able to ensure financial stability, to protect savings and ensure the credit to the economy. Services, which has demonstrated the crisis of recent years, nation states no longer seem able to deliver effectively.

And this leads us to the final jump: fiscal policies .

The Union Banking can break the vicious circle between banks and sovereign debt, the latter brought back to what it should be: a risk-free asset .

Here, once again, the principle of subsidiarity at work: states do not manage fiscal policy in an effective manner, so it is best, in the interest of citizens, that the delegate to supranational organizations acting on behalf of the single market. “These changes represent a transfer of powers to the European level, but just as the banking union, I do not see this as a loss of sovereignty.”

On the other hand it would be strange for him to say the opposite.

Finally, a notation on the future of this bet: “In the dark days of the crisis, many commentators on this side of the Atlantic looked at the euro area and were convinced it would fail. But they were wrong in a more fundamental way. They had underestimated the depth of Europeans’ commitment to the euro. They mistook the euro for a fixed exchange rate regime, when in fact it is an irreversible single currency. And it is irreversible because it is born out of the commitment of European nations to closer integration – a commitment which, as the Nobel committee recognised last year, has roots in our desire for peace, security and transcending national differences. ”

So, to Draghi, and for all those who are working on it, Europe is not a utopia but, to quote the words of Keynes, a eutopia.

In English is pronounced the same way, but the meaning of the two words is profoundly different.

The Utopia is a wonderful place, but unattainable.

The Eutopia is something equally wonderful, but possible.

Keynes introduced this term, August 4, 1942, on the fifth version of its document which proposed a major overhaul of the international monetary system, based on a common unit of account (and therefore an international monetary union) and a clearing house. The document was titled “The International Clearing Union”, and was subtitled: “Not Utopia, but Eutopia”, to underline that this was not a utopian project, but the design of an international space well built, thanks to significant transfers of sovereignty to rebalance international payments and peaceful encounter between peoples.

To hear Draghi, it seems that Keynes has inspired the Eu’ architects.

Not Eutopia, but Eu-topia.



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