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The odd fiscal ‘implicit bargain’ in the Eurozone. A continental view of sovereignty.

At present, the European customs and currency union finds itself in a transitional period. It has not yet politically unified in a federal body, nonetheless it has prematurely bound constituents by ‘hard law’ fiscal limitations mainly by way of the Maastricht Treaty. In other words, it is caught in an odd 'implicit bargain’ (Goodhart) where members are expected to abide by de jure fiscal constraints with no central authority having the fiscal capabilities for stabilization, redistribution, and state-building (Arrighi) expenditures --all of which are indispensable in modern credit (money) economies. The belief underlying the present paper is that by making use of continental economic traditions, reliant on statecraft, an alternative conceptual basis for rethinking continental unity can be forged. Specifically, we look at the work of List, Keynes, and the chartalists. The work of F. List sets European economic unification in its historic place as a strategy founded in large part on exploiting economies of scale (demand and supply-side), by political and economic aggregation of smaller non-self sustaining markets, for ‘catching-up’ with world economic leaders. Keynes’s international economics is revisited as an orienting blueprint for how the European customs and currency union can address the particularity of economic unification among sovereigns absent political unity. Chartalist views are invaluable for an understanding of the political nature of the European Central Bank as it often clumsily attempts to hold together the Union. Despite its differential treatment of members, the ECB has the potential to become a centerpiece institution in the consolidation of Europe as a self-sustaining pole of international effective demand. The overriding leitmotiv binding together the different authors and traditions discussed is that of European economic sovereignty in a region continuously struggling to balance political independence with economic co-dependence and unity.