I think the biggest argument in favour of Federalism is often overlooked: reserve currency status for the Euro + increased headroom to borrow
The dollar’s status as the world’s reserve currency allows it to rack up debt that is 120% of their GDP, compared to 82% debt-to-GDP ratio for the EU.
The USD enjoys reserve currency status because other countries will always need dollar-denominated securities to allow them to exchange global commodities.
What would it take for the Euro to reach a similar status?
➡️ Reserve currency status requires a **capital markets union** to create the marketplace for eurobonds and other liquid instruments, where Euros can be fully transacted.
➡️ It will also require the backing of a **fiscal union**, to stabilize the currency.
➡️ That will therefore require **political union** to democratically decide how each political sub entity within the EU sets its budget.
➡️ Political union will also permit **military union**, which can be grown to defend the credibility of the Euro - e.g. expeditionary capability to assert European interests in commodity markets.
That the US chooses to abuse its debt capacity to fund billionaires and fund foreign wars is a waste. But let’s say European Federalism results in greater adoption of the Euro as a reserve currency, increasing our debt capacity from 82% of GDP to - let’s say - 100% of GDP. That’s an extra $4 trillion in headroom borrowing capacity.
Imagine what an enlightened EU could do with greater headroom to borrow and using debt in a smart way: to look at UBI, invest into education, innovation and reskilling, building world-class infrastructure, a credible and integrated military.
