So while we celebrate our uniqueness as countries, we strive towards further integration as a federation, or whatever you want to call it. In particular, within the Euro zone countries, there are significant gaps appearing between the performing countries and the underperforming; between Germany and the rest; between the excessively exposed (and underprotected by the currency) like Ireland and Spain versus the excessively deep (and overprotected by the currency) in particular Germany. Germany in particular is now in an incredibly powerful position on the one hand – with a highly performing economy – and an incredibly vulnerable position on the other. For if the Euro were to fall apart, the cascade effect on world markets would cripple the export market for Germany, and send the value of the new Deutschmark soaring. Imports would be relatively cheap, sure. But jobs would disappear and the public service would come under immense pressure as the economy contracted.
Notwithstanding the risk – and partially because Germany sees the risk of Euro decline as being even more pronounced for the other members of the Euro zone – Germany wants greater integration; protection for German capital; centralized control of budgets; centralized banking regulation; and tax harmonization. Not only this, but Merkel is also rejecting Eurobonds, Euro zone Deposit Insurance, and debt socialization, even for future borrowing, as it would expose the strong German economy to the weakness at the periphery. In other words, Germany wants to have its cake and eat it. All of the benefits of Euro zone membership, without any of the downside risk. It appears from this remove a quite astonishing ambition.
So if that’s where we are, what is the overall objective? If we go back to the 1950’s and 1960’s, the ambition was genuinely altruistic. Or, at least, genuinely integrationalist. Terrible, atrocious war was a recent memory, and the tightening of relations between the European neighbors made sense. If it was not perhaps exclusively socialist, it was certainly collectivist, and – perhaps not too much of a stretch – objectively good for that. People were thinking about the collective good, rather than individual or state preferment. We have forgotten about The War. No one really believes that war is possible on the continent any more, notwithstanding the relatively recent breakup of Yugoslavia and the subsequent nationalist wars there; or even the ridiculously familiar rise of the far right across Europe in the face of austerity and economic failure. Angela Merkel was not alive while World War II ravaged the continent. Whether that is a good or a bad thing – that we have forgotten – is somewhat irrelevant; what is crucial is that the motivations for integration are significantly different from the motivations 50 years ago. Today, Germany is seeking to protect its export markets and reduce risk to its accumulated capital; other countries are seeking to protect themselves from the specter of default, a fate marginally less bad than war itself. The extent to which other Euro zone countries developed an artificial reliance on the German economy through the performance of the common currency was not fully realized until recently. Today’s globalized and integrated economies are run on debt, and to suggest that an IMF loan was any more onerous than a sovereign loan from the open markets is to ignore the fact that interest rates on sovereign debt were dependent anyway on the market view of fiscal prudence in the sovereign. In other words, countries were and are beholden to markets more fully than perhaps they’d care to admit, and sovereignty is a far more socialized thing than our national anthems, flags and rhetoric would have us believe.
Now there are choices. Many commentators view war as a driver of state formation (such as Fukuyama, p. 85). The time since the last war however suggests that perhaps the impetus has been lost. We can walk away from the Euro and each of us take our chances. That would doubtless lead to economic turmoil worldwide, but the more chilling prospect is one of social unrest, civil war, and possibly even a repeat of many of the events that led to the Second World War. Communications technology would change much of the dynamic, but who knows where that could lead. If borders re-appear within Europe, how do you undo the minority integration? No one wants to go there, though it appears few have an intellectually sound grasp on how to avoid that. We (in Europe) are dominated by short term thinking, this interminable ‘kicking the can down the road’, devoid of strategy and driven by domestic politics. It appears that a leap of faith is required, and that will require strong leadership. Merkel has shown herself to be weak, craven and uncharismatic. Hollande may prove a surprise, but thus far we have not seen anything to indicate that he is anything more than a glorified bureaucrat. Monti is the same. The rest of the so-called leaders of Europe are too weak, or hamstrung by debt to do anything substantial. So Europe is leaderless, rudderless, and will be swept along by whatever tide takes us. That may be to War, and we are just watching it all happen.