The French economy minister Emmanuel Macron is calling for the euro zone to be modified into a transfer union, with a powerful single economic government in Brussels. A transfer union means richer euro-zone states subsidizing poorer ones, and there are three elements to the proposal.
First, member states should make more money available for a euro-zone budget. Mr. Macron does not say how much money, but the more, reportedly, the better. Second, an economic government should be introduced, which pushes through reforms and allocates transfers. Third, a euro-zone parliament should be established for the countries belonging to the euro zone.
How would this transfer union function? For one, there should be debt relief for the currently highly indebted nations, Mr. Macron argues. Otherwise, he says, economic recovery would be impossible. The minister also wants long-term transfers to poorer nations. He is furthermore calling for a form of insurance, or transfers, benefiting countries experiencing sudden crises.
What is to be made of it? The recommendation has considerable shortcomings. First, it is incomplete. A central challenge for the euro zone is the handling of overly indebted nations. Only credible insolvency proceedings can prevent the costs of excessive debt from being shifted to other countries. A transfer union institutionalizes this shift of debts and invites new debt excesses.