Is Europe really on the brink?
Europe's biggest crisis in the postwar era is not just about the economy. It's about a search for identity – and a rationale for staying unified.
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Remember, too, that a decade ago, intellectuals on both sides of the Atlantic routinely described Europe – with a population of 500 million and a gross domestic product of $16 trillion – as "the future." American economic guru Jeremy Rifkin outlined a "European Dream" in which cherished values of justice would merge with social equity. Charles Kupchan of the Council on Foreign Relations predicted an inexorably integrating Europe as a global counterweight to the US. With America mired in a global war on terrorism, British author Mark Leonard wrote convincingly about the "Ascent of Europe."Skip to next paragraph
In Pictures The debt crisis: Europe's fragile union
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(In an interview in London, Mr. Leonard, cofounder and director of the European Council on Foreign Relations, now argues that Europe's unwillingness to face the crisis head-on means "the best-case scenario is a lost decade.")
That is precisely what the best and the brightest have said in interviews in Germany, France, and Britain in recent months. Because this is a political crisis more than an economic crisis, Europe only has to take the next step in its historic process of integration. The problem is that integration, at bottom, means a sharing of debt – and this is where everything turns nationalistic.
What the current crisis exposes is the incompleteness of the 1999 creation of a common currency, the euro, without a common fiscal policy. A fiscal policy would require mutual obligations. Europe has, in effect, a "dollar" without a Federal Reserve.
That leaves the 17-member eurozone in the equivalent position of a US in which the states share the greenback, but each state rises or falls on its own – as if there were a Maine dollar, a Florida dollar, or a Texas dollar. EU states that are weaker, or face bad times, are left to fend for themselves. They are chained to the euro without the ability to devaluate.
The euro was fine in good economic times; its "flaws" have only shown up since the 2007 debt crisis. "They set up, with the euro, an arrangement they have to complete or it will fall apart. And if it falls apart, what then?" asks Philip Whyte, a senior fellow at the Centre for European Reform, a think tank in London. "The eurozone is a pillar of the EU. It is hard to imagine it can collapse without damage to the EU."
Yet unlike the first round of postwar European integration, which was achieved by its founders "on the sly," as it is said – in which for decades institutions were mashed together, forcing different peoples to work with a common purpose – the "next step" of integration will have to be a more conscious decision, analysts say, taken in full public view.
At the center of the issue is Germany. Postwar Germany was the most European of EU states as it confronted its Nazi past. But times have changed; it is unclear whether the public in Europe's most dynamic and unified country is willing to shoulder more of the burden. (More on this later.)