Some years ago, it was a matter of debate whether the European Union economic policy making apparatus would work better than its American counterpart. Some argue that it has. And some aspects of European Union policy making are wise.
But in one big, big area, the European Union economic policy making system is breaking down. Too bad, because the break down should have been avoided, could have been avoided, but simply is not being avoided. I refer to economic policy of managing the EURO. That great flagship of European Union political integration. There are two disasters brewing for the European Union just now. The first is the immediate effect within the European Union of failed policy - hardship in member states caused by insisting balanced budget policy despite trade imbalances. The second is the after effect - distaste for all things European.
To get the full flavor of this, check out three well known experts who are throwing their hands up in despair about European Union economic policy and the management of the EURO.
Paul Krugman rants about economic suicide and driving off a cliff. Strong words.
George Soros warns that things are about to get worse because there is no European economic growth strategy.
Nouriel Roubini laments that imposing austerity is not a solution to the underlying imbalances in the system.
So why do we have a policy impasse? Very simple. Germany, like China, is wedded to a mercantilist export policy. It believes it must run trade surpluses. Germany will not do anything that would threaten this policy. And it believes that allowing a small amount of inflation could have that effect. So Europe becomes all mercantilist or it will go bust. Not all Europe can or will do that, so you can draw your own conclusions.
BTW, as Joe Stiglitz points out, mercantilism works only in the short term. Sooner or later, the rest of the world starts to compete and you get a race to the bottom. Ugly.