DRAGHI DEFENDS EUROPE’S RELENTLESS PURSUIT OF “A MORE PERFECT UNION” AT HARVARD
This Wednesday, October 9, Mario Draghi, president of the European Central Bank, spoke at the Harvard Kennedy School in Cambridge, Massachusetts. Draghi discussed what the 1999 decision of European policy-makers to create a single market (supported by a single currency, the Euro) implies for national sovereignty and how today’s efforts to form a banking union reinforce the single market.
Draghi emphasized that a single market is not a free trade area because it is a permanent union managed at the supranational level. The supposed loss of sovereignty is of little concern as long as citizens benefit. (Indeed, under the principle of subsidiarity, this idea is embedded in the European Union Treaty.) That the single currency adds to the economic gains from the single market, Draghi simply does not doubt.
Without a banking union, location matters in borrowing and lending. Hence, there is no single market for capital. A banking union is desirable because it helps to break “the two-way interaction between sovereign distress and bank distress.”
Draghi ended his talk with reflections on the current state of the economy in the U.S. and the Euro area. Fiscal and monetary policies are intertwined. In his view, the new right of the European Commission to inspect national budgets — a power that the U.S. Federal Government does not have over the 50 states — is a big step forward. Draghi also called attention to the fact that, since 1999, the Euro area has created 600,000 more jobs than the U.S. Many Anglo-Saxon commentators have seriously misjudged the success of the Euro and the commitment of European nations to closer integration.
You can read the transcript of the speech at the European Central Bank’s website below: