Where is Europe’s Bazooka?

Treasury Secretary Paulson wanted Congress to give him a bazooka big enough that he might not have to use it. It turned out that he did have to use his, effectively as it turned out, and now it’s Europe turn to think big. They need a really big bazooka, but show little sign of coming up with one.

We have a dog in that fight; so we are pulling for the European authorities to cowboy up and do what needs to be done to deal with their financial crisis. We hope they find their bazooka, but it doesn’t look promising.

Has anyone noticed that our sideline rants for Europe to get its act together involves our urging them to take measures that became so unpopular here and cost many of our politicians up for reelection their jobs. Europe needs a TARP to shore up their vulnerable banking system. TARP saved many U.S. banks at no net cost to taxpayers, but many of those with the courage to vote for it paid a heavy price.

The financial markets applauded the ECB’s decision last week to cut its policy interest rate, after it had raised it earlier in the crisis. Now the ECB needs to act more aggressively as lender of last resort, expand its balance sheet, and inject much needed liquidity into the banking system. I’m sure such aggressive actions would find favor in financial markets, but those actions almost cost Chairman Bernanke his reconfirmation and put him in the crosshairs of most of the presidential candidates. Some day his picture will probably appear alongside the phrase “No good deed goes unpunished.”

Yes, we want Europe’s leaders to follow the example of our leaders, but they must be prepared to be voted out of office for their trouble. Of course, that process has already begun.



Comments (5)

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  1. Gary Rauber says:

    All of which just serves to further the expansion of government control. Political socialization of the economies both here and abroad is the cause of the problem.

  2. Jonathan L. Gal says:

    So far, the European Union has shown itself to be weak and indecisive, incapable of building an effective bazooka, let alone having the cahoona’s necessary to authorize and/or use one expeditiously and effectively.

    There are many lessons to be learned from the EU, not the least of which is a lesson that was learned 200 years ago, under that early confederacy that the Founders formed and then later scrapped, to be replaced with a more federal system…

    “Confederations are clumsy, indecisive, cumbersome, inefficient, and particularly bad at crisis resolution, which requires stronger, more decisive, and more expeditious action.”

    And, any young American student, who keeps up with his/her study of US history ought to be able to tell you that by the end of Junior High School.

    Why we need a bunch of adult Europeans to re-teach this lesson to the world is what we should be asking ourselves.

  3. Jonathan L. gal says:

    The whole saga is beginning to look more like a Keystone Cops routine than piece of real world history.

    If our own Debt-to-GDP Ratio wasn’t next in line, after Italy’s, then I’d be tempted to laugh at the whole thing!

  4. Joe says:

    >. TARP saved many U.S. banks at no net cost to taxpayers

    My crackhead buddy was bankrupt and wanted $50. He not only promised to pay me back in two weeks, he came through and paid me back with interest. I’m am so glad it cost me nothing and everyone is doing fine.

  5. Jonathan L. Gal says:

    The problem with the EU is not the goal of a centralized union. Nor, is the problem caused by the common currency. Rather, the problem is with the governance structure of the EU institutions and how the currency is managed by those institutions.

    The institutions of the EU are too far detached from the People. Instead of being a government “of the People, by the People, and for the People,” the current construction of the EU is better described as a government “of the politicians, by the politicians, and for the politicians.”

    Of the many EU institutions, the only body that is most directly responsible to the People is the Parliament. All of the other institutions are run by appointees of other political institutions, not by elected officials, which distances them from the People and serves only to entrench the political class.

    Further entrenching the politicians’ power relative to the People, is the fact that only the Executive Branch can initiate legislation. That Executive Branch derives its powers not from an election of the People, but rather from appointed Council of Ministers, which in turn is also an appointed body. Again, the People are not directly involved. Making matters worse, even the Parliament, where members are directly elected by the People, is insulated from public opinion by the rather lengthy 5-Year Term of its members.

    For comparison, the U.S. Federal institutions derive their power much more directly from the will of the People. The President is elected in a national election. Both the Senate and the House of Representatives are elected by the People. And, the House, which has power to initiate legislation – including the all-important and exclusive power of initiating appropriations legislation -must submit to the will of the People once every two years!

    Europe is not alone in its challenge of integrating different cultures under a single government. The United States of America has faced that challenge for more than 2 centuries. Although our track record is not 100% perfect, we have succeeded in maintaining our Union for more than 200 Years.

    The vision of a European Union is a good one. Productive businesses, from which all advances in living standards come, can run far more efficiently under a single currency with a common set of business regulations. When they run efficiently, then they grow more quickly; and at the end of the day, business growth, combined with a sound currency, is the most important means to increasing the living standards and happiness of the People.

    What is needed in Europe is not the complete abandonment of the vision of a European Union, but rather some important changes in the institutional structure of the European Union. The institutions of the European Union should be made more directly accountable to the People of the European Union. Then, it will become more responsive to the various constituencies. Being more responsive to the People will, in turn, make it more successful at keeping them under one roof.

    At one time during our history, the U.S. Senate was appointed by the State Legislatures, very much like the current system for designating the European Council of Ministers. That system was eventually replaced with direct election of Senators, making Washington more directly accountable to the People. The European Union would benefit from analagous changes. The Council of Ministers should be directly elected.

    In addition, the European Union should have regular, EU-wide elections for the Chief Executive position rather than having him/her appointed by a select group of politicians. Such elections will not only make the Executive Branch more directly accountable the People, but they will also set the stage for EU-wide public debates. And, the winner of such elections will be the candidate who best integrates the cultures at the popular level. In short, EU-wide election of the Chief Executive will provide both a forum and an incentive for a continuous process of cultural and political integration.

    Finally, the Parliament should be required to respond to public opinion more frequently than once every 5 Years; and it should be given the power to initiate legislation. These changes would empower the People of the European Union to initiate and drive forward legislation directly from the grassroots, which is really where legislative power should reside.

    A strong union of different cultures must be responsive to its People, just as a successful corporation must be responsive to its customers. The current institutional structure of the EU is not sufficiently responsive to the People that it governs. Changes in its structure, not its vision, are what is needed right now. The institutionalized processes of governing the Union are equally iimportant, if not more so, than the actual policies and legislation that are enacted.