It has been said that the European Union was formed to keep French farmers in business. The common agricultural policy is one of the EU’s founding ideas; today it consumes a third of its budget teaching Europe’s farmers how to suck eggs (milk quotas, “set aside” fields, etc). When addressing the eurozone’s existential crisis, the CAP might offer a model.
It is now accepted – in the nick of time, to be sure – that, to survive, the euro needs a “banking union”: that a single currency requires all the banks in its jurisdiction to dance to the same regulatory tune. Even a eurosceptic like George Osborne, the UK’s chancellor of the exchequer, admits that it is part of the “remorseless logic” of the euro. Such a union would involve a eurozone-wide deposit guarantee scheme, a supervisory body to regulate all the bloc’s banks, and the ability, through some kind of funding mechanism, to recapitalise a failing bank in any of the 17 member states.
A banking union inescapably involves a transfer union – taxpayers in Germany guarantee the deposits of savers in Spain, say. It is resisted in Berlin: Spain’s plea that Bankia, a failing bank, be recapitalised by the European Financial Stability Facility directly crystallised those fears. (An EFSF recapitalisation of Bankia would remove the problem from Spain and park it – where, exactly?) Germany subscribes to the CAP, however, which is nothing if not a transfer union. It sends subsidies collected from all EU member states to a small group of people (farmers) in poorer – and richer – ones.
True, the CAP has created wine and olive oil lakes and butter and meat mountains. But these should be considered the alimentary equivalent of financial firewalls: if farmers fail, people will at least not go hungry. That should be the guiding light of a eurozone banking union – that if a bank fails, the world does not come crashing down around it.
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