ECB President Jean Claude Trichet, speaking on 2 June 2011, on receiving the prestigious Charlemagne prize, has called for a Ministry of Finance to be established in the euro zone with the power to veto national fiscal policies of EU member states in order to sustain the euro. Its remit could include in particular major fiscal spending items. The new European Ministry of Finance which Monsieur Trichet envisages would preside over a “confederation of sovereign states” and would effectively be a financial super regulator for the entire EU region. It would take on “all the typical responsibilities of the executive branches as regards the [European] union’s integrated financial sector”, he stated. He also suggested that a single ministry would be a natural extension of the Eurosystem (the official name for all of the EU’s present governing apparatus). He further proposed that a member state’s deficit should not exceed 3 per cent of GDP.
As other commentators have already pointed out there are two kinds of organisation: those that are rewarded for failure by being given more power and increased budgets (this includes most regulators) and those that are punished for their mistakes, which includes private financial services firms operating in a free market without bail outs. The European Union falls clearly into the first category. Each time EU centralisation is shown to fail, for example, by the creation of an unmanageable currency zone, its bureaucrats’ response is always to centralise even further. When the European Exchange Rate Mechanism failed, the response to that was to create the single currency. The eurozone itself is now in crisis, so the answer, (according to Monsieur Trichet) is to give even greater power to Brussels over national authorities. Crises are useful because they allow a fresh power grab by its institutions. If politics were imbued with the same discipline as the marketplace, with the equivalent of profit and loss, the answer would be very different.