The fiscal compact – formally the Treaty on Stability, Coordination, and Governance in the Economic and Monetary Union
French Prime Minister Manuel Valls and his Italian counterpart, Matteo Renzi, have declared – or at least insinuated – that they will not comply with the fiscal compact to which all of the eurozone’s member countries agreed in 2012
Their stance highlights a fundamental flaw in the structure of the European Monetary Union – one that Europe’s leaders must recognize and address before it is too late.
Hans-Werner Sinn, Project Syndicate 22 October 2014
The fiscal compact – formally the Treaty on Stability, Coordination, and Governance in the Economic and Monetary Union – was the quid pro quo for Germany to approve the European Stability Mechanism (ESM), which was essentially a collective bailout package.
ECB should abolish its OMT program – which, according to Germany’s Constitutional Court, does not comply with EU treaty law anyway.
Furthermore, the ECB should reintroduce the requirement that TARGET2 debts be repaid with gold, as occurred in the US before 1975
Hans-Werner Sinn, Professor of Economics and Public Finance at the University of Munich, is President of the Ifo Institute for Economic Research and serves on the German economy ministry’s Advisory Council.
He is the author, most recently, of The Euro Trap: On Bursting Bubbles, Budgets, and Beliefs, Oxford University Press, 2014.