Crisis in Ireland tests eurozone vision of common currency, common interests
The Greece and Ireland debt crises have raised more questions about a currency that was supposed to unify Europe.
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Germany, which now feels that it’s being asked to indirectly finance Ireland’s government spending, has been among the loudest critics of the country’s low corporate tax rate.Skip to next paragraph
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And while aid for Ireland may ease investor jitters, it may not solve the longer-term issues of guarding the euro from the woes of individual members.
“What we are all talking about now is whether these bailout packages answer the question,” says Rym Ayadi at the Center for European Policy Studies in Brussels. “I’m not sure the packages provide a fire wall at all. Greece is not yet out from the turmoil, and it isn’t clear that bailout will solve the problems that next cases like Portugal have.”
While Merkel and other advocates of greater austerity argue that bailouts should come with more fiscal belt-tightening, including deep cuts in social welfare and pensions, the political effect of such cuts is unclear.
Bruce Stokes of the German Marshall Fund in Washington worries that clashes among member states in this new era are bound to be significant. “The Irish crisis is a reminder that Europe is involved in a slow-motion train wreck,” Mr. Stokes says.
Gabor Steingart, chief editor of the German financial daily Handelsblatt, went further. He called Merkel's policy the equivalent of "Versailles without war."
"The 72 million Greeks, Irish, Spanish, and Portuguese owe 1.5 trillion euros to European banks," wrote Mr. Steingart, adding that “states in distress can scrimp and save to the point of self-strangulation...."
Indeed, the euro crisis comes as the romantic idea of a postwar Europe moving ever closer to complete unity is increasingly in question – even as EU membership expands to 28 when Estonia joins next year. That vision is succumbing to a new populist spirit and a new antiforeign sentiment. Times are tough. Europe must adjust. And that seems to be the new normal.
Not everyone sees that emerging view in a positive light.
“We are going back not only to the nation, but to the tribe within the nation,” says Karim Emile Bitar at the Institute for International and Strategic Relations in Paris. “We are moving from a postnational society to a Middle Ages mentality almost overnight.... The euro crisis is taking place in a European identity crisis.”
IN PICTURES: Some of the world's most eye-catching currencies
Which way forward?
Debt crises in weaker eurozone nations threaten to undermine the euro and sink other eurozone economies. Among the possible directions:
• Bailouts: Greece got one in May; Ireland is next. Will Portugal follow? Or Spain?
• Austerity: Solvent Germany has been vocal in urging deep cuts and tax hikes.
• Fracture: Institute two eurozones, one for the rich north, one for the poorer south.
• Withdrawal: Nations consider the drastic step of dropping out of the eurozone.