As Eurozone leaders continue to tip-toe around solving the monetary union’s confidence crisis, the number and variety of proposed solutions continues to grow. The structural problems of the EU require systemic reform and there have been a wide range of proposals involving everything from changes in monetary policy to breaking up the union. Many plans look towards greater fiscal integration for Eurozone members in order to shorten the dichotomy between the highly variable fiscal positions of member nations and the equal monetary positions. These plans look to fix arguably the worst inherent flaw in the current system and the reason why the people of Greece, Portugal, Ireland, and Italy are currently in such a bind.

Greater fiscal integration is likely to be something that these countries will openly reject- or until they are forced at least. While the idea might seem good in terms of stabilizing the continent, there are greater concerns that should not be forgotten. Increased fiscal integration in almost any form would reduce the sovereignty of each state. And while more in-line fiscal policies would reduce the risks of repeating what is happening now, it is still not guaranteed, especially given the heterogeneous markets and peoples of the Eurozone. What happens if a fiscal agreement is reached only to have such problems resurface down the road? The closer to complete fiscal integration the Eurozone moves, the lower the chance of a repeat crisis gets, but with it sovereignty declines too. If taken too far it could become a threat to freedoms of less represented peoples.

While time is of the essence in the Eurozone crisis, national sovereignty and self-determination is a tremendous attribute of truly free society and should not be taken lightly. It is something that millions of Europeans fought for and uncountable men died for. The importance of sovereignty cannot and should not be questioned here. If it comes down to saving the European Union or saving the sovereignty of existing peoples and nations, the latter should win every time. Europe has paid far too much to have it disappear like this.

One of the possibilities that I left out of my last post concerning the Eurozone was a potential “pre-bailout” of Spain. The Free Exchange blot over at the Economist later posted about it, explaining why it could be a good idea. The rationale behind such a proposal is that it essentially stops the Italian domino from knocking down the Spain, thereby saving Spain as well as the rest of the Eurozone while putting big pressure on those in trouble (Italy namely) to shore up their situations. Free Exchange sees it as a way to put more political pressure on Italy to pass the necessary reforms towards a more sound fiscal position. A more immediate effect might even be downward pressure on Italian yields simply due to reduced risk of a contagion that would end up partly spiraling back to Italy further pushing up yields.

While the positives might sound great, the reality likely is not. Backing Spain indefinitely could be a moral hazard even with stipulations on the aid and it once more sets a bad precedent. I also do not have as much faith in the political system of Italy as Free Exchange seems to, even in the face of such pressure. Even if the political system were sound and ready to act as needed, what to do to shore up the budget without destroying the economy (which would further hurt the budget) is arguable and not very clear-cut. Guaranteeing so much money while still keeping so much risk on the table and placing more responsibility in the hands of Italy right now just does not seem like a great option. I get the feeling that Germany agrees, hence the lack of movement on this potential front.