Ally the emerging toxicity in its politics
l insurance against ak countries. hese stabilisers. It also obility: If one state exn, its workers can go out facing linguistic is stuck in the middle ntries of the euro zone bank but multiple -insurance schemes. ing goes, the only he middle of the road ists have proposed the monetary union. st a political fact: Rich h don’t want to underones on the periphrd as irresponsible. pulist nationalism has deepened the northerners’ tight-fistedness. Recently, a bloc of eight hawkish northern states made clear its opposition to a “transfer union.” In Germany, the surge of the xenophobic Alternative for Germany party has narrowed the government’s scope for solidarity with the periphery.
But the worst news comes from Italy. Last month’s election yielded a parliament dominated by two populist parties that reject economic responsibility. Even though Italy’s government debt is already off the charts, the populists support a ruinously expensive universal basic income and a rolling back of pension reform. Indeed, their irresponsibility extends further: More than a month after the vote, they continue to bicker about the shape of the next government.
Europe’s monetary fragility, too obvious to deny, means the region will at least pretend to do something. France’s president is keen to see progress, and some German leaders support him. But Italy looks less deserving of trust and assistance than it has in a long time. Odds are that the French will extract minimal concessions from the northerners.
Maybe Trump is reckless enough to tank the world economy with a trade war. But the political risk looks higher in Europe. Remember the armadillos.
“The Man Who Knew: The Life & Times of Alan Greenspan.”
European economists have proposed multiple ways to fix the monetary union. But they can’t get past a political fact: Rich countries don’t want to underwrite the precarious ones on the periphery, which they regard as irresponsible.