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From Prof David R. Cameron.

Sir, George Soros (“Three steps to resolving the eurozone crisis”, August 15) is surely correct that a comprehensive solution to the eurozone debt crisis requires a recapitalisation of the banks and regulatory oversight of the financial sector. And he is correct that, in order to survive over the long term, the eurozone will require the ability to issue eurobonds. But it doesn’t need, as he suggests, an exit mechanism to deal with eurozone members that flout the conditions under which the bonds are issued; instead, it needs the capacity to enforce the rules under which they are issued and ensure compliance with the conditions.

Europe will be able to issue eurobonds only after it has created sufficient collective authority over the fiscal policies of the eurozone members to ensure that they share collective responsibility for the deficits of all members and that, as a result, a deficit incurred by any member is regarded by the others as no less acceptable and worthy of collective support than that of any other member.

That authority need not be exercised by a European finance ministry, as Mr Soros, following Jean-Claude Trichet in his Karlspreis speech in June, suggests. But it must be exercised by some institutional body that can act on behalf of the eurozone members and, if need be, can veto decisions by the member state governments with regard to the aggregate amount of revenues, expenditures and borrowing. Before eurobonds, there must be economic government.

David R. Cameron,

Dept of Political Science,

Yale University,

New Haven, CT, US

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