Europe's financial crisis is undermining one of the great global experiments in democracy and economics.
When Jean Monnet was 26, an assassination in the Balkans sparked World War I. When he was 51, Hitler’s Germany launched World War II, engulfing Europe in chaos again. The French economist concluded that only economic integration could keep the continent from war, and spent the rest of his life laying the groundwork for what would become the European Union.
Now, with the continent engulfed in financial crisis that began in the Balkans, it’s disturbingly possible that Monnet’s dream could go down the tubes, as France and Germany contemplate creating a “core” of economically-integrated countries and leaving insolvent members behind.
The European Union as a whole is the world’s largest economy, shares with the United States’ the globe’s largest trading relationship, and represents a noble experiment in international institutions that could be a model for the global future. Twelve years ago, 17 of the 27 European Union countries joined the Eurozone, agreeing to share a currency.
Due to some combination of bad policymaking, the global recession, a glut of investment from richer countries and simple bad timing, some of those governments—Greece, Italy, Ireland, Portugal, Spain—aren’t able to pay back their debts, and may be forced out of the union altogether. First, Greece got to the point where it couldn’t pay its debts, and now the country’s political system is in chaos. Italy, the world’s eighth-largest economy, has followed, with Prime Minister Silvio Berlusconi being forced from power and government borrowing costs rising to the point of unsustainability.
The institutions that Monnet and his inheritors set up to unite Europe have lacked in some cases the tools to solve the problem (there’s no universal government budget in Europe that would make it easy to maintain a fiscal balance) or the willingness to do so (the European Central Bank has refused to take actions to lower interest rates, inflate away debt or backstop the financial system it oversees). The net result has been the sight of European leaders trying to build a fire truck, race it to a burning building, and use as little water as possible to extinguish the blaze. Now, as more and more houses catch fire, they’re squabbling over who’s going to pay for the rest of the water. European leaders would like the people who live in the burning houses to pay, but they’re not in much position do so.
Now, Germany and France, the Eurozone’s most powerful members, are talking about cutting the peripheral Euro countries out of their deal. That may help them solve their problems in the short term, but it will betray Monnet’s vision of economic cooperation and could undermine the continent’s long-term prospects of growth and development. "There cannot be peace and prosperity in the North or in the West of Europe, if there is no peace and prosperity in the South or in the East," European Commission President Jose Manuel Barroso said of reports that the Eurozone may be slimmed.
Europeans are now looking at ways to save themselves from the problems created by their union. But instead of moving forward toward a shared vision of the future, they’re moving backwards, toward more division, in ways that could shake the foundations of the still-slow global recovery. The response to this crisis is missing, and perhaps has missed, a chance to remind the people of Europe—and indeed people around the world, watching this complex crisis with bewilderment and bated breath—that jockeying for power and parochial interests will only undermine their people’s long-term hopes.
If only they can pull back from the brink.