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Reforming the EU

Professor Charles Goodhart, the Norman Sosnow Professor of Banking and Finance at the London School of Economics, has suggested some deep structural reforms, which are designed to prevent future crises emerging in the EuroZone.  His two main proposals are as follows.

1. Political reform
Goodhart argues that “the single most important political reform for the EU is to have the President of the European Commission elected by the voters… The purpose of the exercise is to construct a European polity, and power centre, that answers directly to the people of Europe, and is not simply an apparatus managed by national political leaders.”

2. Fiscal reform in the form of tax-raising powers
According to Goodhart, “as has been exemplified in the recent crisis, it is problematical to try to issue money without the power to support that via taxation.  Equally without access to money (notably via taxes), the power to undertake counter-cyclical, or cross-country, stabilisation is limited.  So, the second proposal is to revisit the exercise that was done, some twenty years ago, to assess what fiscal changes might be needed to accompany a single currency.”

You can read his entire paper here.

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