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.

The Pak Banker - - Editorial5 - Roger Choen

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.

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