Euro, like the emperor, has no clothes
Both the League of Nations and the euro were conceived for worlds that vanished. The League emerged in 1919 from the ashes of World War I with the aim of preventing another war.
Is the euro to the early 21st century what the League of Nations was to the early 20th: a fine idea that became a political orphan and was condemned to unravel? As Ireland follows Greece in the great bailout domino game, and Portugal and Spain loom, the euro can no longer take its survival for granted just because its collapse would be unthinkable.
Both the League of Nations and the euro were conceived for worlds that vanished. The League emerged in 1919 from the ashes of World War I with the aim of preventing another war. But its idealism was an early victim of Hitler's violent nationalism. Changed forces in Europe could not be checked?by its covenant.
Jacques Delors' "Report on Economic and Monetary Union," laying out the path to a single euro currency, was presented in early 1989 just as all changed utterly.
Within months, the Berlin Wall fell, Germany was reunited, the Soviet empire imploded and Yalta's imprisoned European nations were freed. The report noted that "a transfer of decisionmaking power" from member states to the European Community (now Union) would be needed in "the fields of monetary policy and macroeconomic management." A currency, in other words, needs a political authority: History is unequivocal about that. The euro was conceived to complete European integration. But with the Cold War's end, broadening of the EU trumped deepening. A 12-member community grew to 27. A united Germany no longer needed deliverance through Europe from Hitler's painful legacy: PanEuropeanism gave way to pennycounting. Ex-communist nations that had been pawns of Moscow did not want to be pawns of Brussels. A transnational currency was birthed as European federalism ebbed.
This is the backdrop to the euro's agony, for which the latest anesthetic is the $ 113 billion emergency loan to Ireland.
Certainly Alan Greenspan's easy money, the fatal collapse of any serious regulatory culture in the United States, the "new paradigm" nuttiness as the housing bubble grew and all the intoxicating pre-meltdown ka-ching provided the context for the Greek and Irish crises. Oversight went AWOL. Politics is pushing Merkel. She's trying to answer the baying of the Bild tabloid: "Will we have to pay for all of Europe?" Hell hath no fury like a German not getting his money's worth. She's also, undercover, acknowledging that Delors' "transfer of decisionmaking power" is the inevitable consequence of the euro. But how shallow, paltry and mean-spirited has this German reaction to the euro crisis been! I don't recall one word from Merkel about the idea of Europe, about why sacrifices for the euro are consistent with Germany's moral debt to Europe and stake in its united future. "If the euro fails, then Europe fails," she says.
But what, pray, is Europe to the Frau Bundeskanzlerin? A burden, it seems, a conundrum - anything but an idea.
No wonder Delors addressed a withering question to Germany in October: "Are the values which we inherited from the fathers of Europe still present?" No, they've given way to German contempt for "euro zone sinners." These "sinners" are not going to endure joblessness and cuts for a tick from the German headmistress.
Merkel is right to think euro zone 2.0 but morally bereft on Europe, an anti-Delors. That makes me skeptical. The Faustian bargain Germany made for unification was giving up its beloved Deutsche mark for the euro. Now the euro is Berlin's responsibility. Germany must consume more, carp less and conceive bigger. If it doesn't, we'll see euro-zone defaults and the amputation of some of the zone's struggling extremities. Of course, Arkansas defaulted and the dollar survived.