Moody's said the eurozone debt crisis had made policymakers more reluctant to cede sovereignty, while "significant fiscal union" was "off the table". "The process of further integration seemingly relies on further shocks almost by design," it said. Brussels' flagship growth plan also faced significant difficulties as countries with room to invest refused to increase public spending, while fear of further bail-outs meant the banking union remained incomplete, it added. Moody's said the Greek crisis also remained a big threat to the eurozone and EU. "The risk of “accidents” remains high in a process that suffers from partial solutions and, increasingly, public scepticism," it said.
"Crises can be great catalysts for change, and this has been the case in the euro area. "Still, significant vulnerabilities remain - with 'Brexit' and 'Grexit' still key risks. In a period of relative financial calm, the political will to further pool sovereignty evaporates quickly, and it is only against the alternative of a break-up of the existing system that further measures come back into consideration." "There are no empires in Europe any more and our leaders would do well not to try to recreate one." The economics professor added that the global economy would be in "deep trouble" if interest rates remained at their record lows for a long period of time as he called for urgent action to boost productivity and trade. "A Keynesian stimulus can only buy time," he said.
"I'm not saying central banks should raise rates and say: 'to hell with it', but central bankers should deliver speech after speech to say 'we can do no more'". Separately, Adam Posen, a former Bank of England policymaker, urged Mark Carney, the current governor, to speak out against the “delusional fantasy” that Britain could thrive outside the EU.
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