Fundamental Financial Fix

The lead article in today’s New York Times, “Europeans Talk of Sharp Change in Fiscal Affairs,” analyzed some of the weak points of Euro zone countries and how they could be addressed. The Euro has declined significantly as Greece has undergone a sovereign debt crisis, and the lack of central financial institutions has hampered the ability of all Euro-zone countries to assist them.

The problem is the unwieldy nature of the European financial union, and its requirement for unanimous approval by all Euro zone countries before any significant action can occur. The Parliament of any member nation can veto a deal as well.

The article compares the Euro zone legal requirements with the United States’ Articles of Confederation before the Constitution was established. The inability to succeed as a loose grouping of States and the way it was fixed may portend a similar solution by the European Union, creating, in effect, a United States of Europe. Cautious whisperings are already taking place about how to centralize financial authority.

Meanwhile, though, world stock markets continued a significant decline yesterday, with the U.S. markets opening today amid a history of volatility over the past few weeks. Its obvious that a structural fix is needed, but it remains to be seen if the political will exists to accomplish it.