Note: This is my Op-Ed response to Jeff Sach's suggestion that emerging markets should help the eurozone. It appeared in the FT's A-List.
The eurozone’s problems are entirely self-inflicted, and the solutions too must come from within.
However, the European Union may be ‘institutionally incapable’ of getting a handle on the crisis now. Its fragmented structure makes decision-making slow and difficult at the best of times. Petty parochial politics and procrastination has transformed a treatable birth-defect into a near-fatal malady.
The speed, scale and cross-border nature that characterise the crisis now, probably rule out solutions that come from the divided European Council, which is incapable of moving fast enough to restore confidence. The crisis that has already engulfed six of the seventeen euro member states limits their financial ability to act even if they could make quicker decisions. The European Commission, which can act faster, has no money to help.
At a time when the EU most needs to stand together in its response to the crisis, member states have taken to bickering and quarrelling in public. This does not inspire hope for the deeper, fundamental changes to economic governance mechanisms that are urgently required. Without these, the future of both the euro zone and the EU does not look bright.
The EU’s collective response to the crisis exposed serious problems not just with the crisis management apparatus in the Union but also the deficiencies of economic governance during ‘peacetime’. These in turn are the result of not just an absence of technical and legal co-ordination mechanisms but also a lack of political will and leadership.