A lot of Euro observers are confident that a lot of the unnecessary drama surrounding the Euro would go away once Greece leaves the picture. Greece has always been a sore spot in the Eurozone plan. The idea of a shared monetary unit looks great on paper. There are a lot of winners if you look at the Euro as a PowerPoint plan. The problem is the benefits to Germany, the largest economy in the Eurozone, are outweighed by the serious structural defects of a shared currency.
What’s the problem? The Eurozone as well as the European Union is really trying to do something that many European leaders have tried and failed to do in the past. We are of course talking about reuniting Europe. There’s a prediction in the book of Daniel in the Bible about feet of clay mixed with iron. The Feet of Clay represents the ten European kingdoms that arose out of the fall of Rome and according to the book of Daniel, it’s impossible to reunite the Roman Empire because it’s like trying to mix iron with clay. Sure enough, Napoleon tried to do it and failed. Hitler tried to unite Europe and failed. Other monarchs, who in their own way and capacity tried to do it on a regional basis, have come up empty-handed. It’s now the European Union’s turn, and it’s not looking good at all.
Economic union is impossible without a political union
The key reality that many EU ministers are trying to avoid is actually quite simple: Economic union is impossible without political union. They’re trying to hang on to the pipe dream that you can have nineteen separate sovereign countries sharing the same economy and the same monetary unit without compromising sovereignty. It’s not just going to happen.
The problem is there are many different cultures within Europe, and these cultures differ quite greatly as far as fiscal policy, social spending, and social budget priorities are concerned. There are big differences among them regarding fiscal discipline. The most blatant example of this is Greece where the retirement age is very low while retirement benefits are very high. Moreover, Greece has too many older people nearing retirement and not enough young people to pay into the retirement system. It’s a mess. Even if Greece is to exit, it’s just going to be a prelude to larger clashes in the future.
What the European Union is doing right now is just kicking the can down the road. It’s going to run into the central question eventually. It’s going to pit the free spending and fiscally loose south and east against the efficient and more frugal north. It’s not going to be a happy ending unless the Eurozone members quit being in denial about the need to give up local sovereignty over economic policies to the EU.