EUROPE'S LOW GROWTH IN EU AND EURO AREA

SEE ARTICLE BY MARTIN WOLF - http://www.ft.com/cms/s/0/4aa8cafe-3749-11e4-8472-00144feabdc0.html?siteedition=uk#axzz3Cy3Ue4wZ The ECB Balance Sheet has fallen to 2,012 EUR billions, a full third below its peak (3,102 EUR billions, June of 2012). About one quarter of this is committed to repairing the Euro Area banking system, and roughly half of this amount has been deployed at times as replacement bank deposits to cope with capital flight in Europe from South to North. Some capital flight may have reversed, and the severe imbalances in trade and payments between EU members may have narrowed slightly, but the adjustments are taking far too long thereby, with 'austerity measures' prolonging depressed growth rates. The EU is now a union of economic divergence between states and regions after six decades of convergence. If this continues the integrity of purpose of the EU will be dangerously discredited. Alongside whatever the ECB can do to through QE or to counter private capital flows whenever they are especilly destabilising, the EU Commission must also do more to compensate for demand and investment imbalances, doing so in everyone's interests. The Commission's budget should be doubled to provide sufficient firepower to cope with capital flows further exacerbating severe current account imbalances. The Commission is very aware of the growing divergence among national incomes, at least at the regional level, and requires a budget doubling (best if by its own bond issuance) to leverage a restructuring of trade & investment worth annually 1-2% of EU GDP. The prospect of this was stopped by knee-jerk resistance by some member-states ideologically opposed to significantly increasing the Commission's budget. The EU Commission budget is starkly inadequate, of a size in relation to the EU economy little different from that of the UN to the world economy. The decision not to grow the EU budget at a time of obvious economic crisis is leaving communitaire policy efforts to drag the Europe's growth rate up almost entirely to expanding the ECB's balance sheet for the Euro Area, why Martin Wolf sensibly focuses on QE. But, the ECB's willingness to sustain a sizable balance sheet expansion over enough years is politically uncertain, if certainly far better than letting the Euro Area linger much longer in both a politically parlous as well as an economically parlous condition, one, it now seems, not of adjustment and recovery but of long-run historically low growth, and not just by comparison with USA economy data. If the EU, the world's leading example of constructive internationalism, remains weakened and unable any longer to deliver convergence among all EU member states, then not only will it risk its own continuance, but it risks loss of belief in internationalism in the rest of the world, loss of belief in seeking international solutions to profoundly international problems. Internationalism, as we know and rely upon it today is not yet a century old, but is looking like a declining resource. We should fear the risks of going backwards for decades in world internationalism before we wake up to what has been lost and can move forward again?