The Eurozone crisis may not be fully understood by some governments, and greater integration is the solution to the crisis, European Commission President Jose Manuel Barroso told the European Parliament on June 13. Barroso said that it is a defining moment for European integration and that the European Union has a systemic problem. Barroso is concerned that the measures being proposed to protect the Eurozone do not take into account the future unknowns.
Today’s construct of the ever-changing idea of Europe ties multiple countries with deep historical grievances together in an artificial pattern known colloquially after their common currency called the Euro. Many of these countries could not have developed to anywhere near their current infrastructure levels without the creation of a unified continent. And it is becoming clearer that many of them simply should not have tried as huge projects such as the Greek Olympic Games have piled on unmanageable debt.
The European Union cannot survive without the interests of Germany and France aligning, for those are the two strongest economies on the continent. It is not however only the Franco-German relationship in jeopardy as Europe spirals downward. Barroso is voicing frustration at what many other leaders in the Union feel are manipulated fiscal debt solutions that directly favour Germany and France but strangle the peripheral countries.
Considering the history of Europe it is not difficult to predict where tensions will crack the thin European surface if the peripheral countries decide they’ve had enough. The European Union was designed to corral the extraordinary power of the German industrial economy, while simultaneously directing that economic power to build a foundation for the post-war recovery of Europe. In the half century that followed, Germany has developed exceedingly well and essentially bankrolled many of the smaller countries, a task it has been happy to undertake so far. Many of the smaller countries are not able, due to geographic or climatic problems, to prop themselves up on their own. They have relied on strong German export earnings to trickle down into their systems.
The continent’s crisis since 2008 is showing no signs of calming; in fact it has evolved from a strict economic emergency into a political crisis. The elections in France, Spain, Italy, and Greece all resulted in unexpected polling gains for minor parties and for what some would have termed “fringe” groups before the elections were held. They are no longer so. The Europeanists who believed free trade and regulation would usher in period of prosperity that could be shared equally around the member nations is fast becoming an unpopular ideal among constituencies.
Euro-scepticism, a synonym for belligerency only a few years ago, has gained increasing credibility in the public mind-set as a progressive opinion, especially in the common painting of incumbent elites as the aggravators of the current financial woes. The public reaction to German austerity measures for struggling Mediterranean nations such as Greece and Spain has been entirely repulsive almost everywhere, including amongst the German public. It appears to many voters that Germany is pushing for austerity measures that favour Berlin, whether those measures are the answer to the European problem is beside the point. The measures outlined so far do not leave those countries in complete control of their accounts, and by extension their governments. Memory is not short on the European continent, and the Greeks more than anyone remember well the last time Germany tried to gain control of its neighbours.
U.S. Treasury Secretary Timothy Geithner said June 13 that the global economy faces significant risks with the on-going crisis in Europe and slowed growth in many major economies. While the European crisis circles above an potential split, the European Union still has not tapped the potential safety of the IMF and the deep American pockets. The United States has its own financial problems at the moment, but it is in the unique position of experiencing solid growth figures across most economic indicators and it is still the worlds’ largest economy. However, the political decision makers in the US are wary of intervening in the European issue too prematurely, and it is unknown whether they plan to in the future. Geithner said Europe is in the next stage of another major escalation in its strategy to contain the economic crisis. He believes Europe needs a banking union in the near term, adding that it was also important to have a credible financial backstop in place for the countries undertaking reforms.
US suggestions aside, controlling the debt of peripheral European countries is easier said than done. Germany and France understand this, but Barroso is seeing it from a different perspective. The potential expulsion of Greece from the Eurozone will not collapse the system as predicted in a few of the more recent analyst’s apocalyptic predictions. Whether Athens offers to show itself out or is kicked from the party is only going to be the first step.
The real indicator will be when Greece picks itself up and attempts to run its own economy without any access to European funds and trading privileges. Greece will be no longer part of the free trade zone and will have tight trade controls to protect its economy. There could be a long road ahead for Athens to establish viable trade systems with neighbours who are already earning better prices trading with Germany and the Eurozone. On the other hand, if Athens is successful it may encourage other struggling periphery nations currently preparing for similarly harsh German austerity measures to jump ship and try their luck in the outside world too.
German ideals of a prosperous, equal European Union would probably not survive too many nations taking this step, it is debatable it would survive only one or two departures. The free trade enjoyed by Europe is important for Germany; Berlin needs Europe soaking up its manufactured goods to maintain its status as the world’s second-largest exporter. Any precedent for success if a struggling country leaves the Eurozone is why Germany is not excited to push Greece away, just in case the contagion catches.
The disintegration of Europe is not in Berlin’s interests, it is doing very well right now and any future without a Eurozone is unknown, and the unknown is frightening. Since the European Union’s creation France has positioned itself as the partner or even co-leader of Europe with Germany. It certainly is a strong economy compared to most of Europe but it does not have the high export income or consistent year-on-year growth rates of Germany. France also has debt that is three times as large as its GDP figure. French unemployment is hovering close to 8.5 percent; German unemployment is almost three percentage points lower and has a larger population. Germany is so far out from French economic parity that if Berlin did not physically need Paris’ cooperation, it would be the dominant power in Europe. A balance of power exists between France and Germany, but it is not a symbiotic relationship.
France and Germany need to agree on the direction of the Eurozone. The unknown future of the Union if Greece decides to depart is eating away at Franco-German decision making capabilities. There are deep unresolved splits criss-crossing the European continent and the ultimate coherency of the EU relies on everyone continuing to believe that the health of the Eurozone is more important than the personal geopolitical interests of its constituent states. If it is at all perceived to be possible that survival can be achieved outside of the Eurozone, the seeds of doubt will have begun to sprout.