September Is the Cruelest Month

Welcome back from summer holiday, Europeans! Get ready for 30 days that will determine the fate of your continent.

When German travelers return from their hallowed August vacations this week, they will find that the euro is gone -- at least as far as Frankfurt airport is concerned. Without much fanfare, the massive euro sculpture, a fixture at Germany's largest airport since 2001, was unceremoniously dispatched in the dead of night to make room for an inter-terminal railway. The sculpture's unloved twin, which is famously perched in front of the European Central Bank (ECB) in the heart of Frankfurt, has become the symbol of the eurozone crisis (and a favorite of wire service photographers) and may suffer a similar fate. When the bank moves to the east end of the city in 2014, some urban planners are lustily planning the sculpture's removal from public view. Symbols are inexorably tethered to politics, and this one is a doozy.

But in the coming month, anxiety-ridden policymakers struggling to maintain the euro will face a series of threats that are anything but symbolic. September will witness a political big bang that ushers in another existential crisis, and failure on any single issue could wreck the European currency. Over the next month, four potential crisis points constitute a political cliff for Europe that will be key to determining if the eurozone has a future.

First, on Sept. 12, Germany's constitutional court is set to rule on the constitutionality of participating in the European Stability Mechanism (ESM), an institution that was envisioned as the permanent facility for pooled sovereign lending to debt-strapped European countries. The ESM, which passed the Bundestag comfortably (493 votes to 106) in June, would have autonomous control over German public funds -- and therein lies the legal problem. The German constitutional court sees itself as the guardian of a certain idea of Germany -- small, stability-minded, and inwardly oriented -- and court watchers expect a "yes, but..." ruling that stipulates that the red lines of German democracy have been reached. Any further moves to integrate crisis management at the eurozone level -- and there will inevitably be more -- will necessitate a referendum, the first in Germany's post-war history. Already the debate around a possible constitution-altering plebiscite is driving the political narrative.

The second crisis point is the upcoming assessment of Greece's progress in fulfilling the terms of its loan conditions by the troika of the ECB, the European Commission, and the International Monetary Fund (IMF), expected in late September or early October. Greek Prime Minister Antonis Samaras is already trundling between Berlin and Paris in an attempt to prepare eurozone leaders for a disappointing report. Athens' hope for extending its repayment schedule has sparked heated debate in Germany, where exasperated rhetoric on the political right about the inability of Greece to meet its commitments has become more vociferous. Grandstanding in the Bundestag in the wake of the troika report is likely, especially from the arch-conservative Bavarian Christian Social Union (CSU) and the business-minded Free Democratic Party (FDP). Germany's paper of record, Der Spiegel, called in May for Greek's exit from the euro, citing its unwillingness to undertake structural and labor-market reforms.

For ultra-cautious German Chancellor Angela Merkel, the unintended, potentially devastating second and third order consequences of the "Grexit" are anathema. She is a politician who prizes the maintenance of the status quo above all else and fears the unpredictable effects on Spain, Italy, and France, among other countries. A Grexit would eliminate all credibility that the eurozone has left as an insoluble currency union. This could lead to massive speculation and capital flight on an unprecedented scale from countries seen as next in line to go. While German banks have limited but important exposure to Greek debt, they have much more exposure to other countries of the eurozone's south and a need for these markets as consumers for German exports. The effects would tear through the German economy. It is this worry, not a vague sense of European solidarity, that drives the chancellor to hold firm on Greek membership in the eurozone amid the siren calls from her backbench to kick Greece out.

Which brings us to the third element in the eurozone crisis saga -- the Dutch elections, also scheduled for Sept. 12. The Netherlands is one of the small economic powerhouses that has aligned itself with Germany -- tough-minded but traditionally somewhat pro-European. This summer, prominent Dutch politician Bas Eickhout excoriated a group of American commentators for focusing on Germany when lamenting the eurozone's future, when they should focus more on the Dutch and the Finns. His criticism is justified -- both countries are seen as losing their resolve to contribute to the financial lifelines for more bailouts beyond current commitments and the Dutch elections are expected to serve as a release valve for voters' frustration with regarding the eurozone crisis management.

The Netherlands and Finland have not enjoyed the same economic boomlet that Germany had experienced until recently. The Dutch economy shrunk by almost 1.5 percent in the first half of 2012, and Moody's added a negative outlook to the country's prized AAA rating due to the weakening economy. This economic stagnation has bolstered the country's political fringe: The far-left Socialist Party (SP), which is currently leading in the polls, says it would flout EU budgetary rules, call for a referendum on the recently signed EU Fiscal Pact, oppose rescue packages for Greece, and roll back the "Berlin Consensus" economic policy built on hard money, tight fiscal controls, and structural reform. Euroskeptic Geert Wilders' Freedom Party (PVV) will also play a pivotal role in the election's outcome: The famously anti-Muslim politician was in an informal alliance with the center-right until recently and brought down the countries' last government over opposition to EU imposed austerity requirements. His party is also expected to get a substantial share of the national vote.  

The Netherlands' atomized politics reflects a wider ungovernability sweeping Europe. Here, as in Finland, the Euroskeptic fringe is squeezing out the pro-European center. The Dutch elections could add a new actor to the already unwieldy pantheon of potential spoiler governments.

Amidst all this chaos, the fourth and final crisis may be sparked by attempts to draw EU countries closer together. On September 11, the European Commission is expected to present a blueprint a for banking union -- a logical extension of EU's single market. Such a union should create depositor guarantees across the eurozone, guarantee muscular pre-emptive supervision across borders, and establish re-capitalization and wind-down plans for troubled banks that ensure consistency in case of a systemically important bank failure. It would also sever the link between banking and sovereign debt woes. In short, such a scheme is intended to free Europeans from a vicious cycle in which a collapse of a major national bank in a country such as Spain will inevitability lead to the total collapse of Spain's public finances.

These would be necessary and straightforward reforms in a political vacuum. But the EU is anything but a politics-free zone. A banking union will work only if European member states are willing to cover depositors in neighboring states and provide European institutions with tools, such as taxation, that allow reserves to be accumulated in order to shore up weak banks. Since negotiations on such a union will be awash in parochial politics, Euro-watchers should expect decisions that will limit ability of the EU to override national authorities in countries such as Spain and France. Talks are also probable on a limited role for any fiscal pooling that could create a eurozone-wide deposit insurance designed to mitigate the risk of exit from the currency union.

These are just the latest sagas in the ongoing eurozone crisis. In the absence of strong institutions, clearly defined decision-making processes, and a pan-European political culture, the EU has created a snowballing political and economic crisis. The odd reality is that the world economy is now held hostage by such minor political dramas as votes in the Slovak parliament, bilateral collateral negotiations between Finland and Greece, and the ominous statements by former Italian Prime Minister Silvio Berlusconi. This is the height of indulgence, and a reflection of a saturated political environment that is drowning Europe. All of this is having a corrosive effects on European society -- which, if policymakers aren't careful, may turn out to be the euro's ultimate legacy.



America, the Insecure

Hey, America: You're good enough, you're smart enough, and doggone it, people like you. Thoughts from across the pond on the U.S. obsession with exceptionalism.

LONDON — We hold these truths to be self-evident: The United States is the world's original and still-greatest political experiment, founded upon a creed of liberty for all in a land of unprecedented, unparalleled opportunity. This land's manifest destiny is to be a shining city on a hill, a light by which the rest of the world may see the glories of a new and better world. If the journey, approved by Providence, has been long and hard, it is all the more noble for being so. This is, was, and always shall be an exceptional nation, the envy and wonder of the world. America is, like, awesome.

That, at any rate, is the message coming from Tampa, Florida, this week. The Republican Party's convention is, like all such gatherings, a moment in which the promise of America is called to renewal and American greatness is reaffirmed as the country's guiding star. If the United States is not exceptional, then what is it and what is its purpose?

As former Secretary of State Condoleezza Rice put it in her speech on Wednesday, Aug. 29, "The essence of America, what really unites us, is not nationality or ethnicity or religion. It is an idea. And what an idea it is. That you can come from humble circumstances and you can do great things; that it does not matter where you came from -- it matters where you are going."

Viewed from this side of the pond, it is easy -- and perhaps often tempting -- to view this as just so much baloney and balderdash. This doctrinal declaration that America rocks has all the heft and seriousness of a slogan culled from Team America: World Police.

Calls for, as New Jersey governor and keynote speaker Chris Christie put it, a "second American century" cannot quite silence the suspicion that, for all America's great strengths, time and history are against the United States -- and, worse still, Americans know it. Just as the glories of the Roman republic were never so keenly hailed as when the republic was dying, so there is a fin de siècle whiff of decay about this week's paeans to American exceptionalism. The warnings are there. As Rudyard Kipling put it in his great poem "Recessional":

Far-called our navies melt away --
On dune and headland sinks the fire --
Lo, all our pomp of yesterday
Is one with Nineveh and Tyre!
Judge of the Nations, spare us yet,
Lest we forget -- lest we forget!

Britons can give you chapter and verse on these matters. One of the lessons is that absolute decline of the sort Britain endured for half a century is not as terrifying as it may seem. The comparative decline the United States may face this century is an altogether smaller problem.

Of course, no one, not even Democrats, can afford to deny American exceptionalism. President Barack Obama may have made the blunder of suggesting that other countries -- notably Britain and Greece -- might consider their histories exceptional too, but his own self-proclaimed "improbable" journey to the White House endorses his essential belief in American uniqueness. And he has doubled down on this message: Even Obama admits that nobody puts American exceptionalism in the corner. Pilloried for this by Republicans -- with, it must be said, a measure of dishonesty notable even by the shabby standards of election-year grime -- Obama was obviously right (even if the number of countries called to history is, for now, still quite small). Consider France, for instance. President Charles de Gaulle's "certain idea" of France was the belief, tenaciously held despite all the 20th century's myriad disappointments, that France was, is, and ever would be an exceptional nation. Echoes of this persist to this day: France will be different because France is exceptional.

But there are degrees of exceptionalism. The American polity is indeed different from, to take but one example, the Scandinavian model -- yet by any sensible measurement they must be considered close cousins when compared to political and economic systems that predominate in, say, the rising Asian powers. This is not only a matter of wealth (though it is partly that), but also a recognition that Europe's intellectual roots are also America's intellectual beginnings -- even if the New World's habits and preferences have sometimes subsequently diverged from the Old World's.

The differences are more of degree than kind. To take but a single example: Once state and other local taxes are accounted for, total government spending in the United States begins to approach European levels (even more so when the costs of American health-care and greater European redistribution to the poor are included in the calculation). Few politicians like to talk about this.

Moreover, whatever legitimate criticisms may be made of it, the European Union is itself an exceptional project rooted in an idea almost as audacious as that which drives the great American experiment: namely that, after centuries of turmoil and warfare, the peoples of Europe can build a better future if they unite in a common purpose. Constructing a pan-European sense of identity while still respecting the prerogatives of individual nation-states is a bold, sometimes compromised, and as yet unfinished ideal, but it lacks neither ambition nor seriousness. It too, in its way, is a great experiment.

Nevertheless, assailed by the prospect of becoming, according to the Republican critique of Obama's administration, more like Europe on the one hand and spooked by the (unavoidable) rise of China on the other, this Republican convention seems steeped in distress. How did it come to this? What caused this crisis in American exceptionalism? What happened to American swagger? Whence this fretfulness? Most of all, perhaps, where is this generation's new frontier to be found?

Neither political party has a plausible or stirring answer to that question. When George W. Bush suggested in 2004 a manned mission to Mars, the proposal was mocked to death. Rightly so, perhaps, because it was a ploy smacking of desperation and, what's more, one designed to distract attention from troubling events and setbacks elsewhere.

Recall that, in the Republican millennial primary, Bush had run against John McCain's "national greatness conservatism." Bush promised a humble foreign policy and, in general, a modest domestic presidency too. And back then, William Kristol, David Brooks, and other (genuine) neoconservatives considered this a depressingly small vision.

One day in September changed that. Suddenly, America discovered a bigger, grander purpose. The eagle would rise from and soar above the still smoldering ruins of the World Trade Center. A fresh battle was joined, and all countries were to choose their side -- with us or against us, but no messy middle ground.

Real life proved more complicated. National greatness conservatism had its cause but lacked the means or even, sometimes, the desire to see its mission through. It had a short half-life too; even before Bush won reelection, it was on the wane, pinned down in the Hindu Kush and bogged down in the sands of Mesopotamia.

Even so, Bush's second inauguration speech was a manifesto for global liberation so sweeping and fanciful that his own State Department quietly backed away from its promises, retreating to a quieter, more nuanced appraisal of the compromises even hegemons must sometimes accept. But as the wars in Iraq and Afghanistan dragged on, a chorus of voices began quietly asking a pair of terrible questions: Is this it? Was it worth it? American foreign policy gave off the stench of failure.

Today, the more a party talks about American exceptionalism, the more one suspects it fears for the future. It reeks of fear -- not strength -- and like most such boastfulness seems designed to camouflage insecurity. But, after a decade of grinding, attritional warfare in which there've been precious few clear-cut victories and with the aftershocks of a calamitous financial crisis still felt, how could it be otherwise? (Never mind that the economic whirlwind was, at least in part, the consequence of American hubris.)

If Americans fear they're no longer as exceptional as they should be, that's at least in part a consequence of poor George W. Bush's failed presidency. Empires wither when they're overextended abroad and underresourced at home. Rome was lost in Rome just as much as it was doomed in the provinces.

Yet despite Washington's fondness for "picking winners" overseas (an approach, incidentally, that is at odds with the Republicans' view of domestic industrial policy), what's apparent is that the splintering of old orthodoxies in the Islamic world is both a response to American rhetoric and utterly independent of it. If this seems paradoxical, then so be it. The United States neither caused nor can control the so-called Arab Spring -- yet one can't quite suppose that American hymns to universal values had no effect whatsoever. The rippling consequences of both the end of the Cold War and the 9/11 attacks are still being felt, often in surprising ways.

Despite all this, the United States does remain an extraordinary, even an exceptional country. It does not lack resources or will, and its relative decline vis-à-vis other powers is, in one sense, evidence of the American century's success. That is, American notions about the path to liberty and prosperity may not be as universal as some boosters think, but they remain powerful, even inspirational ideas. And Americans are right to celebrate them. The American idea really is worth preserving and celebrating. But that doesn't mean it must be cheapened or swaddled in bombast. Leadership, however, is never as selfless as its leaders like to suppose it must be. Certainly those being led rarely see it in the same terms as those doing the leading. But if other parts of the world are becoming more American (that is, classified by organizations such as Freedom House as "free" or on the path toward being free), this is something to cherish, not fear.

Despite protestations to the contrary from the likes of McCain this week, these are not unusually dangerous times -- rising prosperity in other continents is evidence that the American-led world order did its job. Wasn't part of the enterprise to promote and support the success of American-style capitalism abroad? The American model is unique in its specifics; its general thrust or principles really are more universally useful. Relative decline is not always a bad thing, not least because, for example, the closer China is lashed to global markets, the closer the country is tied to American interests. Chinese prosperity is more of a promise than a threat. In any case, even were this not the case, the American eclipse is still some decades distant.

Viewed in terms of this kind of time scale, the United States has little to fear and much of which to be proud. Even the indignities and the self-inflicted shame of a decade during which the United States disgraced itself in the name of the War on Terror has not yet entirely eliminated all this -- even if, at times, Washington has appeared to forget that the rest of the world is watching and that foreign peoples will measure American actions by the yardstick of American rhetoric. Indeed, it is America's greatest friends who have reason to feel betrayed by its shortcomings at Guantánamo, at Abu Ghraib, and in the CIA's "black sites." Preaching the faith is one thing; living it is another. And the United States has too often asked that its good intentions compensate for its practical and ethical failings. Exceptionalism, if it is to mean anything, also means setting the bar high for one's self.

Britain long ago accepted relative decline as something inevitable. Bankrupted and exhausted by two world wars, Britannia reappraised its position. Yet today this small island of just 60 million people remains the world's sixth-largest economy and is still, in so many ways, an exceptional and extraordinary place. The opening ceremony for the London Olympics was a poppy, populist celebration of all this -- it spun a surprisingly coherent narrative of an exceptional nation that, from Shakespeare to the Industrial Revolution to popular culture, has transformed the world. It was an oddly stirring story that put decline in its proper context.

Someday, some time still long in the future, the United States will tell a comparable story of its own. This too will be no disgrace. Sometimes it's enough to be good without having to strain to be exceptional.

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