CPS Research Fellow Rupert Darwall writes for the Wall Street Journal on David Cameron's decision to veto the EU treaty.
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The 26 members of the EU-minus-Britain must show they have the capacity to resolve the euro crisis.
No British prime minister since Margaret Thatcher would have vetoed a proposed European treaty as David Cameron did on Friday at the Brussels summit. Where Mrs. Thatcher was combative—her triple "No" after the 1990 Rome summit precipitated her resignation a month later—Mr. Cameron was a model of moderation and grace.
Of her successors, John Major was one of nature's fence-sitters, endlessly keeping options open. Having the courage to stand alone was a quality Gordon Brown did not possess. Tony Blair's every instinct would have been to support the treaty. When he was prime minister, politically he saw a "huge case" for joining the euro. As Mr. Blair told the Journal's Robert Thomson earlier this month, the single currency project was politically driven and motivated. To save the euro, "the economics have got to be adjusted to meet that political ideal and reality," Mr. Blair said.
The view articulated by Mr. Blair goes far to explaining what has brought the euro to the brink of implosion—the belief that politics could drive economics. For a time, markets did follow politics. After the abolition of national currencies and currency risk, bond yields converged down toward Germany's rates. But as the euro crisis now shows, in reality the euro zone remains a patchwork of national economies.
In aggregate, euro-zone government-debt ratios compare favorably to those in other countries, such as the U.S. and the U.K. Why then is the euro zone in crisis while those countries are not?
One answer is that markets are being irrational in failing to recognize the euro zone's superior solvency. An alternative explanation is much more ominous: by pooling sovereignty, the markets are no longer rating euro-zone members as sovereigns. Thanks to the Maastricht Treaty, euro-zone members have lost the individual capacity to act as sovereigns, but this loss has not been compensated for by an increase in the effectiveness of the euro zone's collective capability.
It's therefore something of a misnomer to describe the euro zone's trauma as a sovereign-debt crisis: The euro zone is in crisis precisely because its members no longer possess all the attributes of sovereigns.
In this sense, the fears of British euroskeptics about the creation of a European super-sate have proved unfounded. Far from creating a super-state, the Maastricht Treaty and its successors have created a dysfunctional sub-state. Paris and Madrid are like Sacramento, California and Austin, Texas, but Brussels isn't Washington, D.C.
The U.S. Treasury secretary's signature is on every dollar bill. Ultimately a national finance minister's power derives from the power to collect taxes based on a uniform tax code throughout his country's jurisdiction. There is no proposal for European fiscal union that remotely takes the euro zone to this end-destination.