IMF for the first time made an overall assessment of the EU
By Philip Whyte,
29 December 2012
From EU inside
According to Philip Whyte, a senior research fellow at the CER in London, to accept that the eurozone suffers from a structural flaw that can only be corrected by more federalism is politically explosive. In his analysis, he points out that a more federal structure goes at the heart of sovereignty because it allows European bodies to dictate the fate of national banks, putting taxpayers' money at the disposal of the eurozone to solve problems in other member states. This is the reason, the analyst believes, why it takes so much time to accept the idea of a banking union and all its implications.
It is clear that a fully fledged banking union in the euro area will not emerge any time soon, Philip Whyte writes, because political constraints are too big. Acquiescing a partial federalisation, embodied in the supervisory mechanism for the banks, however, will not solve the problems, the analyst is convinced underscoring that the rest of the bitter medicine - direct recapitalisation of banks, creating a resolution mechanism and deposit guarantees - cannot be avoided. Moreover, he explains, partial solution creates another problem - destabilisation of the EU-27 by diminishing the status of the non-euro countries.