"Is Europe Imploding?" (Wallerstein)

[Ed Jewett]

Why Greece Must Fail

This preempts, slightly, a question I ask in next week's podcast, but not having seen the idea anywhere else I feel an itch to get it out there. Thinking about Europe, one is reminded of the old saw about Nato: it exists to keep the Soviets out, the Americans in, and the Germans down. Well, there was a lot of truth to that. Post-WWII European diplomacy was preoccupied with the question of how to integrate Germany into European affairs. What with the fall of the Berlin wall, the dissolution of the Soviet Union, and the rise of the European Union, including the adoption by most EU members of a common European currency, we Americans tend of late to forget how apprehensive the Europeans can be about the Germans. And for their part, the Europeans have either forgotten about the German problem or don't want to talk about it.

Enter Greece. From a Greek perspective the sensible resolution of their financial crisis would be to leave the Eurozone, default on a large part of their debt, and have Athens run deficits in Drachmas to stimulate the economy. I believe that strategy would work. But from the European perspective this would be the worst of all worlds. When the hypothetical comes up, it's only ever described in terms of the Greek "contagion" spreading. That frames the question the wrong way. The real problem is that the Greeks might make a success of leaving the Eurozone. Then Portugal, Spain, and the rest of the usual suspects might want to try to emulate the Greek example. Worse — much worse — the unexpected suspect, Germany, might also think twice about staying in the Eurozone. After all, about 60% of Germans now believe that adopting the Euro in favor of the Deutschmark was a mistake. And bailing out other Eurozone members is highly unpopular among the Germans. If Greece were to show the way, then might not Germany follow? But if that were to happen a great deal of what's been achieved politically in Europe in the post-WWII era goes up in a puff of smoke...
Indeed, in such a case it would not be a hyperbolic excess to consider similarities with the pre-WWII era. It's pretty clear that Germany would become a European superpower. But nobody would be quite sure how the Germans might throw their weight around.
It's possible that some European capitals (Paris?) are thinking along these lines and not talking about it. More likely, there's a collective subconscious urge to avoid taking the saddle off the Germans.
All in all, it would be tragic to make the Greeks pay for a semblance of European unity. Hopefully, the Greeks will be able to figure this out.


Posted by George Kenney on April 30, 2010 11:49 PM


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Comments


The Greek crisis has been useful for reminding Europeans (at least those in high places) that the monetary union has always been more a political project than one that made economic sense.
Nobody's saying anything publicly, but now that the 20 years of Maastricht-hypnosis has largely been broken. As you say George, It's not unreasonable to assume that there are all sorts of conversations going on in European capitals as to whether the current Eurozone is sustainable.
I'm not sure whether we'll see the disappearance of the Euro, but a much more constrained Eurozone of the wealthiest economies (Germany, Benelux...France?) may be an option. In this scenario the Euro would essentially become what it could have been from the beginning — a supranational Deutschmark supported by Germany's trade surplus, with Euro policy essentially run from Berlin rather than the ECB in Frankfurt. The Dutch and the Belgians probably could live with this scenario, but I can't see the French hanging round for long in such an arrangement.

Posted by: Richard | May 1, 2010 5:26 AM


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