George Osborne today repeated his call for greater fiscal integration among eurozone countries battling the ongoing debt crisis.Of course, we see what's going on here. A British Chancellor worried about a highly fragile recovery at home, wants to avoid an immediate meltdown in the eurozone - something which would send the UK economy back to recession. Understandable in one way.
The Chancellor urged governments in the single currency nations to follow the "remorseless logic" of further financial fusion.
He said: "The financial crisis in the eurozone is extremely serious.
Fortunately Britain is not in the euro; unfortunately however, we are not immune to the instability on our doorstep.
"The euro area must implement its policy commitments to address the crisis."
Mr Osborne added: "The euro area should follow the remorseless logic of monetary union with greater fiscal integration.
"We must ensure we are not part of that integration and our national interests are protected and promoted at all points."
Conservative David Nuttall (Bury North) called on ministers to press for eurozone countries to be allowed to ditch the currency without sacrificing membership of the European Union.
But the Chancellor stressed the euro was "here to stay" and said there was "no immediate prospect of major treaty renegotiation".
Speaking at Treasury questions in the Commons, he claimed Labour remained committed in principle to taking the UK into the single currency.
And yet, at the same time, not. Because if he supports fiscal integration on the basis that it'll fix the eurozone, and therefore aid the UK's recovery, surely it follows that he should specify what kind of fiscal integration he has in mind. There's fiscal union and there's fiscal union. Half-hearted fiscal integration that doesn't solve any of the underlying economic problems in the eurozone, but still leads to a pretty nasty political fallout (we all know the political cost of bailouts and collective borrowing by now), must signify the worst of all worlds for the UK.
For example, as we've argued before, it is far from clear that the watered down mix between eurobonds and national bonds that currently is being discussed will actually end the crisis. Such an arrangement would discourage fiscal discipline while possibly even increasing overall borrowing costs for indebted economies, as the national share of the bonds would face alarmingly high rates. There's also the massive question of implementation and how eurobonds could be applied without imploding the existing bond market.
Some clarity on this please...