By Francesco Sisci
Greece is
saved one more time and the euro sound. Yet it is the European Union that has fallen apart in
the most recent round of the crisis on the old continent.
The bet that the International Monetary Fund (IMF) made with the eurozone on Greek debt paid off. IMF chief economist Olivier Blanchard pledged an intervention by the Fund in support of Greece only as long as Europe took part. Initially, Europe wanted only the IMF to intervene, but the IMF replied that it would step in only if Europe was committed to rescuing Greece. In other words, Europe refused to save Greece on its own, and it wanted an extra-European intervention to solve Europe's most critical problem.
This was not because Europe lacked the funds or instruments to support Greece, but because it lacked the political will necessary to rescue the euro's weakest link. In other words, Europe refused to resort to political instruments to solve the European crisis. It wanted, rather, a purely economic solution that wouldn't bring the continent closer together politically.
The crisis of the European continent, which was in the end a political crisis about differing fiscal and financial policies and rates of productivity in member states, was not solved by addressing the political issues, but by finding a solution based on continental and extra-continental accounts. In fact, Europe didn't want to intervene in Greece, it wanted the IMF to do it, and paradoxically, it wanted the IMF to force the hand of Europe to move into Greece.
Many Europeans were hopeful that the economic crisis would bring Europe together, and Germany would find the will to lead a greater Europe. Yet, this didn't happen, and possibly will not happen in the near future. Greece had to be saved not for the sake of Europe but for the sake of the Atlantic alliance.
Greece, out of Europe, would have thrown itself at the mercy of the Russians, who are a bit too eager to embrace the old cradle of the Orthodox faith and possibly to give Athens the necessary credit to rekindle its economy and create a naval base for the Russian fleet in the Mediterranean. This base is presently located in Syria, torn by civil war and threatening to fall apart - and thus putting at risk Moscow's only foothold in the Mediterranean.
Moreover, in Germany, as economist Francesco Giavazzi had been arguing, Chancellor Angela Merkel is moving to the left as the September 2013 federal elections approach. She needs to undercut Social Democratic opposition with clearer support for the euro, a currency that, despite all of Berlin's reservations, Germans have grown to trust like the old deutschemark.
These elements, however, do not solve the basic issues of the present crisis: the lack of unitary political will, and thus the lack of unitary fiscal policies. In fact, as many observers have grown to believe, the split on the euro is not about money, fiscal policy, or even efficiency, but it is about ideology, ways of life, customs, and cultural habits.
In the Financial Times on November 21, Joshua Chaffin argued that the real split in Europe is between Northern European countries that believe they can grow within the present monetary constraints and countries in the south (like Italy, Spain, and France) that believe present constraints make it impossible for Europe to grow.
In the middle of this crisis, most countries, in the North and South, think it is impossible to push forward a unified policy, whatever it may be, and it would be easier to just split up. David Cameron's UK is moving in this direction. Britain thinks it cannot put forth its ideas about European management, and thus it may well pull out. If it defects, in theory it may not be a mortal blow to the unitary currency, as the UK is not part of the eurozone. But the movement toward breaking with the European Union could be just as serious a blow for the political unity of the continent.
Within the eurozone, there are localities thinking of splitting from their present nations. Catalonia believes that breaking from Spain would increase the chance of its own survival while staying within the euro area. If the Catalonia referendum were to declare it independent from Spain, this could start a movement of other rich areas in poor countries who seek a better fate on their own within the euro area. In fact, if Catalonia today and northern Italy tomorrow were to break the national unity in their respective countries, the rest of Spain and the rest of Italy could be left with little or no strength to face their present and future financial difficulties in Europe.
Problems of breaking up the unitary currency would be multiplied after the UK's and Catalonia's pro-independence decisions. Is there any other way? The euro is safe, but Europe may be dead. That may be the best result many people in and out of Europe can expect from this crisis. But this leaves also a huge political vacuum in the old continent. In the general scheme of global affairs, this European setback may not count for much. After all, Europe is no longer the border state having to face a threatening USSR and/or the Middle East.
At present, Russia is no longer a threat to the world like the Soviet Union was. The Middle East, with or without its Jasmine Revolutions in Libya, Tunisia, Egypt, and Syria, has failed to disrupt the energy supply to the West, and security-wise it is safely under Israeli and Turkish watch. Moreover, in the long term, the discovery of huge shale gas reserves in the United States will free America from dependency on the Middle Eastern or Russian oil. These short- and long-term issues make Russia and the Middle East less and less relevant for America, which has been refocusing its attention on Asia, the area of future global economic growth.
This leaves the European countries saddled with the euro but without European political unity, with the Middle East steeped in deep and useless internal torment, and with the neighboring Russian giant still seeking its own destiny. But this Europe in this Mediterranean is bound to become marginal in global affairs over the next decade as the world refocuses on the Pacific.
Is this the destiny Europe wants for itself? The Europeans will have to decide on that.
The bet that the International Monetary Fund (IMF) made with the eurozone on Greek debt paid off. IMF chief economist Olivier Blanchard pledged an intervention by the Fund in support of Greece only as long as Europe took part. Initially, Europe wanted only the IMF to intervene, but the IMF replied that it would step in only if Europe was committed to rescuing Greece. In other words, Europe refused to save Greece on its own, and it wanted an extra-European intervention to solve Europe's most critical problem.
This was not because Europe lacked the funds or instruments to support Greece, but because it lacked the political will necessary to rescue the euro's weakest link. In other words, Europe refused to resort to political instruments to solve the European crisis. It wanted, rather, a purely economic solution that wouldn't bring the continent closer together politically.
The crisis of the European continent, which was in the end a political crisis about differing fiscal and financial policies and rates of productivity in member states, was not solved by addressing the political issues, but by finding a solution based on continental and extra-continental accounts. In fact, Europe didn't want to intervene in Greece, it wanted the IMF to do it, and paradoxically, it wanted the IMF to force the hand of Europe to move into Greece.
Many Europeans were hopeful that the economic crisis would bring Europe together, and Germany would find the will to lead a greater Europe. Yet, this didn't happen, and possibly will not happen in the near future. Greece had to be saved not for the sake of Europe but for the sake of the Atlantic alliance.
Greece, out of Europe, would have thrown itself at the mercy of the Russians, who are a bit too eager to embrace the old cradle of the Orthodox faith and possibly to give Athens the necessary credit to rekindle its economy and create a naval base for the Russian fleet in the Mediterranean. This base is presently located in Syria, torn by civil war and threatening to fall apart - and thus putting at risk Moscow's only foothold in the Mediterranean.
Moreover, in Germany, as economist Francesco Giavazzi had been arguing, Chancellor Angela Merkel is moving to the left as the September 2013 federal elections approach. She needs to undercut Social Democratic opposition with clearer support for the euro, a currency that, despite all of Berlin's reservations, Germans have grown to trust like the old deutschemark.
These elements, however, do not solve the basic issues of the present crisis: the lack of unitary political will, and thus the lack of unitary fiscal policies. In fact, as many observers have grown to believe, the split on the euro is not about money, fiscal policy, or even efficiency, but it is about ideology, ways of life, customs, and cultural habits.
In the Financial Times on November 21, Joshua Chaffin argued that the real split in Europe is between Northern European countries that believe they can grow within the present monetary constraints and countries in the south (like Italy, Spain, and France) that believe present constraints make it impossible for Europe to grow.
In the middle of this crisis, most countries, in the North and South, think it is impossible to push forward a unified policy, whatever it may be, and it would be easier to just split up. David Cameron's UK is moving in this direction. Britain thinks it cannot put forth its ideas about European management, and thus it may well pull out. If it defects, in theory it may not be a mortal blow to the unitary currency, as the UK is not part of the eurozone. But the movement toward breaking with the European Union could be just as serious a blow for the political unity of the continent.
Within the eurozone, there are localities thinking of splitting from their present nations. Catalonia believes that breaking from Spain would increase the chance of its own survival while staying within the euro area. If the Catalonia referendum were to declare it independent from Spain, this could start a movement of other rich areas in poor countries who seek a better fate on their own within the euro area. In fact, if Catalonia today and northern Italy tomorrow were to break the national unity in their respective countries, the rest of Spain and the rest of Italy could be left with little or no strength to face their present and future financial difficulties in Europe.
Problems of breaking up the unitary currency would be multiplied after the UK's and Catalonia's pro-independence decisions. Is there any other way? The euro is safe, but Europe may be dead. That may be the best result many people in and out of Europe can expect from this crisis. But this leaves also a huge political vacuum in the old continent. In the general scheme of global affairs, this European setback may not count for much. After all, Europe is no longer the border state having to face a threatening USSR and/or the Middle East.
At present, Russia is no longer a threat to the world like the Soviet Union was. The Middle East, with or without its Jasmine Revolutions in Libya, Tunisia, Egypt, and Syria, has failed to disrupt the energy supply to the West, and security-wise it is safely under Israeli and Turkish watch. Moreover, in the long term, the discovery of huge shale gas reserves in the United States will free America from dependency on the Middle Eastern or Russian oil. These short- and long-term issues make Russia and the Middle East less and less relevant for America, which has been refocusing its attention on Asia, the area of future global economic growth.
This leaves the European countries saddled with the euro but without European political unity, with the Middle East steeped in deep and useless internal torment, and with the neighboring Russian giant still seeking its own destiny. But this Europe in this Mediterranean is bound to become marginal in global affairs over the next decade as the world refocuses on the Pacific.
Is this the destiny Europe wants for itself? The Europeans will have to decide on that.
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