Forex Flash: Will fiscal union solve eurozone’s economic crisis? - Nomura

FXstreet.com (Barcelona) - Richard Koo, Chief Economist at the Nomura Research Institute has questioned whether fiscal union can solve the Eurozone's economic crisis.

He begins by noting that opponents of austerity do not appear to have properly thoughtout why this is not the right policy for Europe. He feels that the majority of people in this camp reject fiscal consolidation simply because the economy is so weak and growing weaker, while few understand why austerity is the wrong policy response. He writes, “For example, many of those I met on my recent trip to Europe said it was wrong for the eurozone to adopt a common currency without fiscal integration. But I do not believe that fiscal integration at this point would help solve Europe’s problems.” Overall, he feels that the joint issuance of eurobonds would have little impact if austerity continues, but fiscal union would solve the problem of intra-eurozone capital flights. However, he sees that fiscal consolidation is a given in the debate over fiscal union.