The plan to "save the euro through unlimited bond-buying" that ECB president Mario Draghi presented last week shows one thing above all, and with blinding clarity to boot - why nobody picks up on it is beyond me: it shows that Draghi is the least suitable person to present any such plan.

Any country that wants a bailout under Draghi's terms, that is: any country that wants its bonds to be bought by the ECB, must relinquish a substantial part of its sovereignty. At the very least, such a country will no longer be in charge of its own economic policies.

And it doesn't stop there: the countries that will need to pay for and/or guarantee the bond-buying will also be called on, just like the ones whose bonds are bought, to relinquish a substantial part of their sovereignty: the ECB wants much more control over the banking system across Europe. The drive is towards more centralized (i.e. Brussels, Frankfurt) control, leading to far stricter fiscal union and political union, which would take away much of the control eurozone countries presently have over their economies.

Ergo, Mario Draghi's plan is not an economic one, it's political all the way (sovereignty, don't you know). And politics is not Draghi's field, if only because he's neither a politician nor elected. He should not be allowed to have any say whatsoever in it.

The problem with the plan is purely political as well (granted, it's also financially completely useless, but that's another, though by no means separate, story). Nobody in Europe, other than a handful of bureaucrats, truly wants to hand over sovereign powers. For very good reasons, no politician in any EU country will campaign on promises to give the keys to the house away, no more than they will do so on handing over the keys to the safe. Ambrose Evans Pritchard quotes former Spanish PM Jose Maria Aznar as saying that the drive for full fiscal and political union is "deeply misguided":

"A United States of Europe is an impossible idea. It is a very serious mistake to try to destroy the nation states. You cannot go against the cultural beliefs of the people and the forces of history [..]"

Indeed; and only someone like Draghi would be blind to that. That's what makes him dangerous.

At some point in the process, you must let the people speak. And if you don't, they will speak anyway. Let's not forget that there is not an elected official in sight in the ECB, yet it still attempts to make decisions that are clearly political in character. The notion that it is all just about finance has long since turned vanished into thin air.

In our western democratic societies, all decisions should in principle be taken along democratic, i.e. elected, lines, and that includes any and all economic and financial decisions. The 17 members of the eurozone should therefore hold 17 separate referendums on whether or not their people are comfortable with giving up all sorts of sovereign rights to unelected institutions. But that is not very likely to happen, since the outcome would be all too clear: no, nein, non, no way.

Meanwhile, Europe wastes a lot of valuable time and money focusing on only one possible outcome of this crisis: that Greece and Spain and everyone else will and must remain within the eurozone. It would do much better to spend far more of that same time and money on a veritable search for a plan B. That is to say, a search for ways in which the weakest brethren can leave the eurozone without blowing up completely either themselves or the monetary union.

By Raul Ilargi Meijer
Website: http://theautomaticearth.com (provides unique analysis of economics, finance, politics and social dynamics in the context of Complexity Theory)

© 2012 Copyright Raul I Meijer - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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