Europe’s Perfect Storm: The Political and Economic Consequences of the Eurocrisis

What exactly is the Eurocrisis a crisis of? Is it a currency crisis? A crisis of economic policy-making in Europe? Is it a crisis of a particular, expensive social model, as American conservatives like to claim? Or of the whole political project of European integration as it has been developing since the 1950s? The answer is, a bit of all of the above. In fact, it is a perfect political and economic storm, one that may still sweep away many accomplishments of the European Union—the greatest political innovation since the creation of the democratic welfare state. Even if the euro survives in its present form, the price millions of people will have paid for its preservation will be very high indeed. Quite apart from the economic disasters unfolding in Spain, Greece, and other countries, there have been less obvious but equally dangerous costs. The crisis has distracted elites from urgent political matters, above all, the rise of a new kind of illiberal politics in Eastern Europe. It has recreated political and cultural rifts between national elites long thought dead; it has also sown distrust and animosity between ordinary people. Not least, it leaves a deep sense of discontent and disillusionment with the European Union as such.

There is no consensus on either the economics or the politics of the crisis. Ask three economists and you will get four different answers as to what the underlying problems are and how to solve them. Ask historians why European elites created a common currency in the first place, and you’ll hear that it was the price Germany, with its strong Deutschmark, had to pay France for unification in 1990; but you might also hear that it was actually German business that wanted to eliminate exchange rate fluctuations. And if you ask political scientists, you’ll probably hear that Europeans will under no circumstances tolerate further integration to address the crisis—or an insistence on Europeans’ readiness to erect a full-fledged federal state, right here, right now. And, finally, if you ask the people themselves, you’ll get rants by Germans about lazy Greeks, and Greeks holding up posters of German chancellor Angela Merkel as a Nazi. Rarely, in recent memory, has there been so much confusion or outright disagreement both in elite circles and on the street.

This lack of consensus may seem obvious, but it is not trivial, as the European Union has always moved forward either by consensus or by compromise, a polite way of saying that reluctant populations were paid off to come along. Spain, for instance, was uneasy about fully joining the single economic market, fearing its industries might be uncompetitive; accordingly, Brussels invented “cohesion funds,” subsidies for infrastructure in the poorer regions of Europe, to create a package attractive for all. Today, there is no consensus—especially not between France and Germany, the traditional motors of European integration—and there is no money for...

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