The European Monetary Union Violates More National Sovereignty

     I had posted previously that Greece has lost more of its sovereignty because of its bailout by the European Monetary Union, as a result of the sovereignty that all members of the Monetary Union lost when they gave up their national currencies in favor of the euro. Now, Italy has also lost additional sovereignty.

     Under pressure from the European Monetary Union because of its high public debt (120% of Italy’s relatively large Gross Domestic Product, which makes it the third or fourth highest amount in the world), the Italian government has proposed yet another austerity program, which accelerates the previous austerity program, which was in addition to earlier austerity measures.  I have been posting about these developments since last year.  As I mentioned in my last post, the latest austerity program had been praised by the Monetary Union, which then panicked not long afterward and insisted on a larger, more accelerated plan to balance Italy's budget. The new program includes a number of additional reductions in spending and the size of Italy’s bureaucracy, as well as a few measures that might increase economic growth to some degree. Alas, it also includes a tax increase on the upper class that the Italian center-right government had opposed, but was compelled to propose by the Monetary Union.

     Income tax increases reduce economic growth by taking more money out of the economy and by disincentivizing higher earnings from work or investment. In turn, the decreased prosperity reduces government revenue. For example, the loss of revenue because of a tax increase was one of the reasons that Greece was forced to accept additional austerity measures earlier this year. Like Greece, Italy’s economy, with its meager 1% GDP growth, is especially vulnerable at this time to the effects of a tax increase. But for the pressure from the European Monetary Union, Italy would likely have avoided the tax increase.

     Ever since the introduction of the European Common Market, and especially the Monetary Union, I have believed that the loss of national sovereignty eventually would be problematic and that member states, especially in the Eurozone, would come to regret their decision to join. The current European debt crisis is increasingly exposing the folly of the scheme and how its violations of sovereignty are harmful to Europeans.