What's a sovereign nation?

Greece wants their drachma back.

What is a sovereign nation? That's not a question I have traditionally spent a lot of time pondering, assuming, naively, that all nations are sovereign by definition. But it's more complicated than that. Originally, the States of the United States were supposed to be sovereign -- or at least much more sovereign than they are today, but that went out the window long ago (thanks Commerce Clause abusing Congress!). And I think that there is a similar process underway in Europe. My proposition is this: if your currency is denominated in Euros and your country's name is not Germany, then you are not a sovereign nation or won't be for long. So, rather than look at what a sovereign nation is, I'll look at what a sovereign nation isn't. Consider Greece. They have been relegated to vassal state status with their monetary policy being dictated by the IMF and the holders of Greek bonds including Germany, France, and others.

What got me thinking about all of this is learning a little bit about Modern Monetary Theory or MMT. There is a lot to MMT and I won't go into it all here, but a key element is that a sovereign state issuing its own fiat currency can never be insolvent. Most macroeconomics are predicated on the government being able to nudge things like inflation, employment, and investment by increasing or decreasing the money supply. When a country's currency is pegged to foreign currencies or is not even under the country's control as with Greece and the euro, the country's monetary policy options are severely constrained. The way the EU is organized is much more problematic than the States since the individual countries are kinda-sorta sovereign in that they have armies and considerable independence over their finances, but those using Euros are much more constrained in their monetary policies than those that do not. It is interesting that the Brexiting UK and other problem children Hungary and Poland don't use the euro. If I were a Swede I'd say you can pry my Kronor from my cold, dead hand. Lather, rinse, repeat the other still fairly sovereign countries. I bet Greece would love to have their debt in drachmas rather than euros. There's not much they can do about the debt today, but there is one plan for how they can get their drachmas back.

The EU much different from the US is that the EU nations are much more different one from the other than the States are in the US. The EU nations have distinct languages, customs, values, traditions, etc., whereas much of the diversity of the US is mixed together and spread out to varying degrees and, for the most part, knit together through the common usage of English. My suspicion is that the only countries in the EU with a real tradition of a Roman-style sense of naturalization are the UK and France and maybe the Netherlands. That is, the French are more likely to see a naturalized French citizen as French (as long as she acts French) than say a Hungarian is to see a naturalized Hungarian citizen has Hungarian.

The most important euro-using country wrestling with its lack of sovereignty is Italy. Unlike the UK, much of the Italian government debt is denominated in Euros, thus leaving the EU much more problematic than the already problematic Brexit. Moreover, an Italian exit of the EU would cause seismic disruptions to the EU and the euro with the loss of the EU's third largest economy that Italy represents. Default by Greece would have been painful for investors, default by Italy might cause a global financial crisis.

Countries and banks are getting too big when the failure of one can bring down the global economy. Banks we can do something about. Countries not so much, but a United States of Europe needs to be built with a lot more care than is being used to run it today. The UK voted for sovereignty. I wonder if they will be the only country to do so.