Walter Russell Mead: Europe in Crisis
The latest sickening bout of stock market turbulence underlines the point I made on this blog last December; the next stage of the global economic crisis is centered in Greece.
That’s an unpleasant reality for our European friends who have spent much of the last decade chattering about American decline and the coming crisis of the dollar.
As usual during the last 100 years of inexorable European decline, they missed the main event: Europe once again has blundered its way into a major crisis.
A pair of them, actually. Internally, the Greek problem is showing signs of mutating into a full scale crisis of the European project. Externally, the decisive shift of Ukraine into Russia’s orbit reveals the bankruptcy of European foreign policy and the inability of the 27 member European Union to formulate, much less carry out, a comprehensive foreign policy on matters affecting its vital interests.
The Greek meltdown is on the surface just another financial crisis: yet another delusional country pursuing the path of least resistance has made promises it can’t keep to public and private sector workers. Now the bill must be paid and the IMF called in to reorganize the national finances.
If that were all, it would not be so bad, but something much bigger and more troubling is involved.
The internal problem stems from the fact that the euro, widely hailed as Europe’s greatest initiative, is starting to look like a strategic mistake. Europe’s countries and cultures may be too different to live under the same set of economic policies. While none of the European countries wants American-style capitalism, some are much better than others at managing their economic affairs in an orderly fashion. Germany and the Scandinavian countries plus the Netherlands in particular seem to have a gift for good economic management. Spain, Portugal, Italy and Greece don’t manage things as well, by and large. (France stands uneasily in the middle; more competent than its southern neighbors, but less effective than the Germans.)...
This is a political crisis for Europe rather than a financial crisis because the only way out for the PIGS involves a large bailout from the northern countries led by Germany and France. Germans especially don’t want to pay. It has been clear for some time that the Greeks cheated and lied their way into the eurozone, and for years they have pursued selfish and foolish economic policies. Why, Germans ask with some force and logic, should German taxpayers who cannot retire until their late sixties pay the bill so that Greeks can retire at 55?
The answer from increasingly rattled European elites is that unless the Germans step up to pay Greece’s bills, and quickly, the panic will spread. First Portugal (where the crisis is already beginning) and then and much larger economies like Spain and ultimately perhaps even Italy may need help. At that point the survivability of the euro would come into question.
For European elites that would be a nightmare and represent the ultimate failure of the dream of an ‘ever closer union’ enshrined in the EU’s founding documents. Politically, countries like Greece (where the hard left is still a significant factor) might start looking more like Venezuela or turn in Russia’s direction. Bitter squabbling between a newly impoverished south and a self-righteous, angry north would consume European politics and undermine the EU’s ability to get anything done....