Mish: From the point of view of the EU, Münchau is largely correct. The EU can blunder along in its creation of an economic nannyzone with or without the UK, but not with or without Germany.
However, from the point of view of the UK, it would be better for the the UK to leave. The UK does not need inane EU agricultural subsidies, inane financial regulations, inane work rules, or this endless bickering over rules and budgets that the EU nannyzone requires of member states.
Münchau: Today’s EU has two important functions left. Some readers may find my list shockingly short. The first is that it provides the institutions and legal framework for the eurozone to muddle through to a solution of its crisis. I am not saying that the eurozone will necessarily achieve that goal. There is a non-trivial probability that it will not.
The banking union could be a first step towards a single market for finance at eurozone level. Ultimately, I would also expect a single market for labour and for services, all at eurozone level. If there is a fiscal union, its budget will end up not only bigger than the EU’s, but also different in composition – to fulfil the purpose of macroeconomic stabilisation.
Mish: I advise betting on the "non-trivial probability" things do not work out as Münchau sees. Ironically, the more "success" the EU has on achieving one-size fits none "nannyrules" for everything under the sun, the lower the overall growth in the region because the bureaucracy, financial taxes, agricultural rules, etc., are generally headed in the wrong direction.
Münchau:The EU’s second important function is to serve as a waiting room for member states who are not yet in the eurozone, but are willing to enter it at some point in the future.
In the end, it does not matter whether the outs leave the EU formally, linger compliantly on the fringes or whether the eurozone leaves them. A messy divorce of some sort will take place, at some point, possibly still quite a few years away. It could take numerous forms. A formal separation is only one of several possibilities. But it is not sustainable for a group of permanent outsiders to enjoy permanent co-decision rights, even though the EU is endlessly patient when it comes to accepting transitional arrangements. The reality is that there is no sustainable biosphere that is outside the eurozone, but inside the EU.
Mish: There is a big difference between the UK sitting on the fence and the Czech Republic, Denmark, or Sweden sitting on the fence. The difference is the UK's size and ability to make waves.
However, let's assume Münchau is correct, that "there is no sustainable biosphere that is outside the eurozone, but inside the EU".
Given there is very little chance of the UK joining the eurozone, the sooner the UK leaves the EU, the better. Since that is what Münchau implies (assuming he agrees the UK will not join the eurozone), we are largely in agreement.
Münchau: By insisting on an EU budget freeze, Mr Cameron is ultimately doing the eurozone a favour. By undermining the EU, he provides further incentives for the eurozone to grasp its collective interest. I support him.
Mish: Not quite. Cameron sits like a wimp on a fence unable to do what needs to be done, nor will he even put the matter to a vote.
Monti Presses Cameron for EU Referendum
Most likely to the shock and horror of the bulk of nannycrats, Monti presses Cameron for EU referendum.