The euro may not have brought Europe together, except in shared misery, but it has divided it in previously unimaginable ways. Votes can now be won in Finland by bashing faraway Greece, a place hitherto thought of in Helsinki (if at all) as a helpful supplier of beaches. Europe being Europe, the troubles of the single currency have also given a boost to more traditional antagonisms and, Europe being Europe, revived plans for a nasty new tax.
That tax, the financial-transaction tax, is now being pushed by Germany (with France scampering behind). Britain, already in the doghouse for allegedly not doing enough to help out the single currency it had rejected, is talking veto, while Germany, being Germany, is threatening to proceed regardless. Fleet Street being Fleet Street, there are warnings of a “Fourth Reich.” Many Greeks are saying (and shouting) the same thing, much to the fury of those German taxpayers bailing out a nation they see as idle, dishonest, ungrateful, and — old prejudices bubble up — a little too swarthy to be trusted.
It’s time to calm down. The financial-transaction tax is a thoroughly bad idea, with a dose of old-fashioned national nastiness thrown in (Britain would pick up a huge percentage of the tab), but Merkel’s demands for better budgetary discipline within the eurozone are, in theory, rather more easy to justify. If Germany is, one way or another, to underwrite the common currency, insisting that its money is not frittered away is good housekeeping, not empire-building. Not an empire in any traditional sense.
But Merkel is pfennig-wise but mark foolish (or she would be if such splendidly sound money still existed). She is set on defending Germany’s interests, but only within the parameters of the EU’s transnationalist, post-democratic agenda, to which, it seems, she subscribes. The appealing idea that Germany should, for its own good, quit the eurozone, either alone or in the company, say, of the frugal Dutch, remains off limits, and there is absolutely no prospect that Germany’s voters will be given any direct say on that topic. They never wanted the euro, but they got it. Now they are stuck with it.
And that’s how the EU, born out of a distrust of nation-states and their voters, was always meant to work. The difficulty for Brussels is that this system is now being tested as never before: The eurozone has become the site of a dangerous, chaotic, and half-hidden power struggle between its political and bureaucratic leaderships (which are themselves deeply divided on how far to take deeper integration, but that’s mainly a tale for another day), nervous financial markets, and increasingly riled-up voters.
This wasn’t on the program. To the extent that Brussels had any strategy at the time of the single currency’s launch beyond finger-crossing and prayer, it was that the eurozone’s inherently flawed nature (very different economies joined in monetary, but not fiscal, union) would eventually lead to an over-by-Christmas “beneficial crisis.” Financial markets would force through the closer fiscal union that politics could not deliver. Once that had been achieved, the zone’s individual nation-states would count for very little, and their voters for even less.
That’s not how it has worked out. The mechanics of currency union (more on that later) have combined with irresponsible sovereign borrowing and the economic horrors of recent years to foment a financial storm that may be too devastating to be harnessed in quite so “beneficial” a way. The crisis could yet work out (in that cynical Eurocratic sense), but the terrible damage it has already caused has driven home the real costs — political, economic, and financial — of the monetary union to electorates that have long been denied an effective say in its future. Now that they know what they now know, it will be more difficult to keep them on the sidelines.
But over in the PIIGS they are still huddled there for now. In the last few weeks, Prime Ministers Berlusconi and Papandreou have been forced out with shocking ease, replaced by technocrats bearing the Brussels stamp. Italy was issued a former EU commissioner, and Greece a former vice president of the European Central Bank. Neither man had previously been elected to anything. Who cares? The message to Italian and Greek voters was clear — beggars cannot expect to be, so to speak, choosers — and so far surprisingly few of the beggars have objected. So long as it is seen to be better to be in the zone than out, hairshirts and all, this argument will fly. Underlining this, Spain, Portugal, and Ireland have all held elections, and, in each case, the electorate supported austerity. But if virtue’s reward is too long delayed, that consensus could easily shift, and if that change in sentiment is not addressed by those in charge, there could well be serious disorder.