Last year, Germany’s Chancellor Angela Merkel warned: “Nobody should believe that another half-century of peace in Europe is a given.
“If the euro collapses, Europe collapses. That can’t happen.”
But there is now a risk that the euro, the 10-year-old common European currency, might indeed collapse.
The trigger could turn out to be last weekend’s election in Greece.
New Democracy and PASOK, the centre-right and centre-left parties that have alternated in power since democracy returned to Greece in 1974, were abandoned by voters in revolt against the savage austerity measures that those parties had accepted in order to keep the country in the euro.
The beneficiaries were radical parties of the extreme right and left.
Greek incomes have fallen sharply and one-quarter of the workforce is unemployed. It’s not a recession in Greece, it’s a full-blown depression, and Greek voters don’t want to hear about how massive foreign borrowing got them into this mess.
They just want it to stop.
The chief victims of their ire have been the two centrist parties that signed the deal.
Three years ago, they got almost 80% of the vote.
This time they got just over 30%.
The missing 50% mostly went to parties of the extreme right or radical left that reject the deal.
Those parties are too far apart on other issues to form a government in Athens with majority support in parliament, so there will probably be another election in June.
If no coalition that will abide by the deal comes out of that election, then the EU will halt its financial aid to Greece — and when the next big payment on the country’s debt falls due at the end of June, Greece will default.
Greece will have a very hard time if it defaults on its debts and crashes out of the euro, but it is having a hard time already.
In the end, default may be better than staying in the euro and suffering endless austerity while trying to pay off an impossible load of debt.
But what will then happen to the common currency, and to the European Union itself?
The common currency was meant to strengthen the unity of the EU, but it has had exactly the opposite effect.
Without a single authority to enforce the necessary fiscal and budgetary disciplines, such a currency is bound to fail.
Last Monday, Jacques Attali, the former adviser to the late French president Francois Mitterand, said the euro will not last five more years “unless there is a single European state.”
He’s probably right, but there is obviously not going to be a single European state in five years’s time.
Therefore, by Attali’s own logic, the euro as we know it is doomed.
But Angela Merkel is probably wrong: That is unlikely to spell the end of the European Union itself.
The EU survived perfectly well for
40 years without a single currency.
The Greeks will probably be using new drachmas before long.
The Spanish may also be back to pesetas and the Italians to liras before we are much older. Perhaps the euro will survive as the common currency of the rich and efficient economies of northern Europe, and perhaps not.
But the demise of the euro would not mean the end of the EU or of peace in Europe.
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