Leszek Balcerowicz, one of the authors of Poland's 'shock economic therapy' in the early nineties, says that a lack of integration within the EU is not the cause of the finance crisis.

Leszek Balcerowicz: photo - PR/Wojciech Kusinski

“The lack of a federal Europe is not the cause of the problems in Greece or Portugal,” Balcerowicz, a former head of the National Bank of Poland, told Polish Radio, Thursday, after president of the European Commission, José Manuel Barroso, called for a “federation of nation states” to stop the continuing eurozone crisis.

Balcerowicz disagrees, however, saying that the cause of the finance crisis is not to do with a lack of EU integration, but the availability of “easy money”.

“Let's look at the facts. The lack of a federation in the European Union did not contribute to the crisis in Greece: it was easy money. Interest rates declined in countries that have little [financial] credibility.”

He said that measures put in place to control debt levels, enshrined in EU treaties, were not kept to.

“The introduction of the euro [single currency] was accompanied by the introduction of the Growth and Stability Pact, which required that deficits in the eurozone should not exceed 3 percent. But [the breaking of this treaty] was tolerated,” he said this morning.

In his annual 'state of the European Union address', José Manuel Barroso said on Wednesday that the eurozone crisis has shown the need for increased political and economic integration within the 27 bloc as a whole.

“In the age of globalisation pooled sovereignty means more power, not less.” he said.

“I call for […] a democratic federation of nation states that can tackle our common problems, through the sharing of sovereignty in a way that each country and each citizen are better equipped to control their own destiny,” the European Commission president added.

Balcerowicz argues, however, that new treaties are not what is required to solve the finance crisis but better economic policy taken by national governments.

“Some European economies are doing quite well, because of they are enacting better economic policy,” he said.

On Germany's Constitutional Court ruling giving the green light on Wednesday for the country to ratify Europe's new bailout fund, Balcerowicz said this was “no surprise” but that the answer to the crisis is not the availability of bail out packages but “better economic solutions”.

Though the worst economic performance has been in Greece over many years, the economies in Italy and Spain are considered so important that this has “put pressure on the European Central Bank to print the money, buy their bonds.”

“This policy by the ECB is worse than the disease in the long run," he warned. (pg)