Since Bismarck in the nineteenth century Germany has been engaged in all sorts of empire building, mostly failed experiments. But this time when they thought they had hit upon the winning formula, a loose currency union among the continental European states and even some Eastern European ones, it seems to be unravelling at the seams. Why? In techincal terms it seems to be because it is a “currency union” and not a “fiscal union”, let alone a political one.
Ever since Alexander the Great and Julius Caesar Europe, particularly Western Europe, has been trying to get together. Most of the history of Western Civilization has been one war or another that England, France, Spain, the German states, Scandanavia, and Italy were fighting. There were religious wars, disputes over territory, wars to eject the Turks, and wars just to see who was the top dog. But never until after World War II did Europe, and Germany in particular, get the idea to form a “currency union” so Europe could in effect become the United States of Europe, able to compete on the world stage against the United States of America.
But no one predicted the Great Recession of 2008, the biggest downturn since the Great Depression of the 1930’s, that helped to start the Second World War when Germany really lost big. The last thing Germany wants is another failure at its door as the leading power of Europe.(World War II never really changed that.)
The political powers that be in Germany, Angela Merkel’s coalition, cannot ignore voters and opinion polls that state plainly that Germans would rather have their tax cuts than have to pay to give Greece more aid of the kind that doesn’t get paid back with interest. German voters are angry that one year ago Greece received a 110 billion euro bailout and now needs another one according to the Wednesday, May 25 article in the Wall Street Journal, “Europe Split On Debt Crisis Worsens”. Is there no end in sight? Nor do they have the control to reform Greece’s internal finances, which would mean a political commitment of the kind that they have eschewed since the days of the Third Reich.
There is a paradox. They cannot allow themselves to participate in a currency in common with Greece and have Greece default through “restructuring”. That would lower the value of their own currency! And yet they can’t handle a “fiscal union” whereby they would always be willing and obliged to pay Greece’s debts to prevent such a default and prevent the default’s effects throughout the Euro Zone such as the closing of Greek banks and the contagion that could spread to Ireland, Spain, Portugal, and Spain.
Germany needs to decide quickly before events decide for it what kind of union it really wants — one where it values the EU above all instead of one where unpredictable events are in charge and could very well undermine its own economy against its own will.