ANALYSIS/OPINION:
However reluctantly, Europeans are increasingly bellying up to the eurozones ultimate crisis. The talking heads present a dilemma: The European Union will either pick apart its common currency or take radical steps toward a highly centralized command economy.
Thats because a triangle of forces is strangling the euro. Markets, faced with the threat that bankrupt members of the monetary alliance will default, have been raising the cost of refinancing. Northern European taxpayers are warning their elected governments that they will not continue to bail out their southern neighbors. And a plethora of national and international monetary organs are desperately maneuvering to protect their bloated bureaucracies turf by improvising temporary rescues.
Placing even more power into the hands of unelected bureaucrats for economic amalgamation would be a giant step. Thats not going to happen because, inauspicious as it is for the monetary crisis, widespread political opposition (most of it constitutional and peaceful) to the growing calls for austerity is evidence of grass-roots sovereignties as old as the end of the Roman Empire. How difficult the protesters are to assuage has been demonstrated by a half-century of tortured progress on the European Project.
More apparent daily is the inadequacy of building “Europe” from the top down — even given the vision of Charles de Gaulle and Chancellor Konrad Adenauer and their technocratic collaborators. Absent a process such as the American Continental Congress, which boasted grass-roots representation, the EU’s history of painstaking compromises to conflicts has led Europeans into a blind alley on the economic front, however much success has been achieved politically.
Meanwhile, as so often happens, the helter-skelter of daily events obscures the coming inevitable need to make a decision. Those events include critical happenings on the dollar side of the Atlantic, too. Evidence of the refusal to face the problem at hand is a proposal by idiosyncratic Economics Nobel Prize winner Robert Mundell to fix the dollar to the euro, to anchor the ever more threatening parallel international currency instability.
Mr. Mundell might just be defending his original sponsorship of the euro, a common currency that was designed to bounce around a dozen different national economic strategies without an overall guiding hand. But pinning fixed prices for rapidly devaluing dollars to disintegrating euros would indeed be rearranging deck chairs on the Titanic.
Its rash and, of course, daunting, at this early juncture to speculate in a few hundred words on the implications of the euros demise. But going where angels fear to tread, here are some guesses:
Whether or not hard-nosed advocates will win out in making surgical cutbacks of U.S. government spending in order to save the dollar from being overwhelmed by domestic and international deficits — a question as large as the euros future — the role of the dollar as the international reserve currency is willy-nilly being strengthened. All talk of massive East Asian dollar holdings shifting into euros — never a real possibility — is now out the window. Talk of a nonconvertible Chinese international reserve currency is too idiotic to discuss. We have already been through a failed “supracurrency” experiment with the creation of the International Monetary Funds “drawing rights.” And there may not be enough gold to cover ever-expanding liquidity demands.
The exacerbation of the euro crisis unfortunately has elevated its role in the overall project for a stable, prosperous, unified Europe. While crucial, the euro was, originally, only one of many unification efforts — a common trading market; a common labor/migratory zone; joint financial, environmental and health regulations; a common foreign policy; and a common defense. These have been, at best, only partially achieved just as only 17 of 27 EU members — notably excluding Britain, with its global financial hub in the City — have adopted the euro. The common currency has been exalted to the touchstone for success of unification, and its demise therefore becomes increasingly catastrophic for the Continent.
Coincidentally, the coming euro breakup will help rehabilitate America’s role as a superpower, despite Washingtons obvious economic and geopolitical-military overextension, persistently exaggerated by President Obama’s determined campaign to deflate the American image. That rehabilitation will be helped not only by hedonistic Europe’s lack of determination to tend its own military defenses, but by its continuing reliance on the U.S. See, for example, the American intercontinental anti-missile shield that Washington has no option but to build in pursuit of its own security.
So, accept it: The euro construct is dead! Long live European diversity — the wellspring of Western civilization!
• Sol Sanders, veteran foreign correspondent and analyst, writes weekly on the convergence of politics, business and economics. He can be reached at sol.sanders@cox.net. He also blogs at https://yeoldecrabb.wordpress.com.
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