If we are to believe the latest new, France and Germany are now talking about a European fiscal union, widely-held to be what is missing from the failed Euro monetary experiment. It is commonly believed that when a supra-national fiscal body can spend to compensate for private sector losses and/or dissaving in a particular region, this European experiment will be all hunky dory.
But what about labour mobility? Can Greeks or Irish just decide to uproot themselves and start anew in Germany? Can the French do it? Or vise-versa, can Germans just decide to look for jobs in Greece or Portugal? European financial and market integration can increase prosperity in a particular country or sector, while causing social upheaval in another. Inequality arises because while businesses can take their money and technology anywhere in the common area, their workers cannot follow suit, or counter with similar moves of their own. People cannot mitigate the deflationary effects of capital leaving one region by migrating to another, or mute the harsh consequences of a neighbour country’s continual trade surpluses, by piling on to that country.
While countercyclical fiscal policy can help alleviate these deflationary effects, a lack of mobility will still hamper efficient distribution of the benefits of integration. After all, integration probably wasn't pursued merely to allow one country to capture all its commercial value, while another region ends up perennially on welfare, or on make-work programs. There's probably no true union unless all Europeans consider themselves to be Europeans first, who just chose to live in the region they live in. Without freedom of mobility, they're all probably better off having both fiscal and monetary sovereignty.