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The Euro Forced Marriage

The time was a year before the Euro launched, the place was the tiny town of Burghausen, Germany.  Busloads of people from their sister city in France were welcomed with fluttering tricolors silently proclaiming liberty, equality, and brotherhood. It was declared “French Week” through the town as menus in German gave way to French and the whole town celebrated unity.

I asked Herr Mitterer, the owner of the Hotel Post, if this grand “Eurozone” idea was going to work.  “It has to,” he replied, “We’ve seen the alternative.”

Underneath the giddy celebrations at the end of a long period of expansion, the Euro was launched in 1999.  It was always a forced marriage, a necessity blessed like any marriage with talk of happiness and great times ahead.  But at the first sign of trouble the cracks are showing.  Fourteen years on it is at a turning point – move closer or forget the whole thing?

The Hotel Post, Burghausen, Bavaria

The Hotel Post, Burghausen, Bavaria

If you ask French President François Hollande, the solution is to move closer.  The union, born in good times, simply does not have the ability to respond to what is clearly a depression throughout Europe.  Consolidating everything together into one tighter family would create institutions that can respond to the crisis and move ahead.

Not so fast, say many voters – including a growing block in Germany that would just assume have a divorce.  The Alternative for Germany is a new kid, but growing fast.  It may pose the most significant threat to Chancellor Merkel’s government in September’s election.

This comes against the backdrop of a continuing crisis that is universally being called a “depression” without any reservation.  Major news outlets on both sides of the Atlantic have handy guides to help readers navigate the daily barrage of bad news and crises.  Many are starting to question the solvency of banks all across the Eurozone.  Capital has become almost impossible for small businesses to obtain in many nations, and as we know from the (limited) success in restructuring here in the US that small businesses are the only way out.

Meanwhile, the kids of this marriage are growing restless.  Youth unemployment is 66% in Greece, 56% in Spain, and 38% in Italy.  Unemployed youth will likely make for a long, hot summer of protests and growing unrest.

What went so wrong in this forced marriage?  The European Central Bank (ECB) was set up in good times and never had the tools to handle a crisis.  There is no equivalent of the Federal Deposit Insurance Company (FDIC) to bail out bad banks, and there is no mechanism for wholesale quantitative easing as the Fed has done.  Where both sides of the Atlantic have political stalemates, at least over here the Fed has been able to act and do something – the ECB is by comparison powerless.

That is the origin of the two ideas on how to move forward.  One is to increase integration and have a body that can make the big decisions and stem the crises before they become big.  The other growing popular movement would just assume walk away and forget the whole thing.

It is becoming clearer that the constant flow of bad news is coalescing into one very big story – what is this thing called “Europe” and where should it go?  Those who are stuck in the marriage are sick of the fighting and stress and all thinking about where it goes from here.

Meanwhile, the original reason for the Eurozone is very much being laid bare.  It has to work, if for no other reason than to prevent another disastrous war.  But the generation that remembers war is dying off, and the kids left to carry on have no jobs and no hope.  They will be the ones who make something of the rich heritage one way or the other.

This year we will find out just where they go with it.

“It has to work, we’ve seen the alternative,” keeps coming back to my ears.  “Es muss macht, wir haben die Alternative betrachtet” is a much more compelling reason than the words of Schiller sung to van Beethoven’s tune so often in 1999, “Alle Menschen werden Brueder.”

If this has to work, it better start working now.

This piece is an attempt to bring context to many news stories on Europe from many different sources.  Follow the links for more information. 

10 thoughts on “The Euro Forced Marriage

  1. I don’t doubt they have a reckoning coming up. How long has this been going on now? They can’t “kick the rock down the road” forever. I was wondering what you think about what they will do. I can’t imagine the Euro failing but people keep talking like its a possibility.

    • This has been going on since Greece “revealed” what everyone knew – they had been fudging the books – back in late 2009. So it’s been 3.5 years of one crisis after the other.
      I would put the odds of Euro breakup pretty high right now, about a coin toss of 50/50. There are so many things that can tip it, but a popular uprising is the one that I think is the most dangerous for the Euro. I’ll be watching the Alternative for Germany to see how much ground they make. I think that’s the biggest threat to the Euro now.
      The politicians in place now will do just about anything to preserve the Euro. The biggest other threat is a major bank collapse – which also seems more probable than it should.
      Of course, I’m just a guy on the wrong side of the Atlantic reading a lot of scary news reports. I’d love to hear from my European readers (and I know you are out there!)

  2. The Euro cannot fail. We have come too far to turn back now. There will have to be reforms and more accountability. This will make it possible to give the ECB more power. I have every confidence that all people will see the wisdom of this. That includes the Euroskeptics.

    • Thank you for your response. I hope that you are correct. I also hope Euroskeptics can add to the conversation necessary to make this happen. They may have some very good advice that will make whatever new union results even stronger.

  3. Seriously, what happens if the Euro fails? The MSM makes it sound like the apocalypse but people will keep living, working, ect. Something will come together to replace it, right?

    • There will be at least months, if not years, of chaos and a complete collapse of major trades like construction that rely on credit. Many banks could fail as well. It will the second coming of the Great Depression no matter how it goes down.
      We have to hope it does not happen.

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