In all four countries, the concentration of power fell following cuts to the public sector and other belt-tightening measures. Fringe parties gained power on the left and the right, from the racist, ultra-nationalist Golden Dawn party in Greece to the leftist Basque separatist Amaiur party in Spain. Naturally, the ruling centrist parties have responded to the threats from the fringes. In Spain, for example, the People's Party is reinstating bullfighting across the country, aggravating Catalans and Canarians who had outlawed the practice.
The political fallout of the euro's shortcomings is not limited to Europe's south. In Britain, the Conservative Party has been dialing up its euro-skeptic rhetoric in response to the growing power of parties that oppose the country's membership in the European Union. Even in Germany, linchpin of the eurozone, a new party has proposed scrapping the common currency but remaining in the political union.
Last week Jorgo Chatzimarkakis, a German member of the European parliament who is of Greek extraction, warned that Brussels and Frankfurt had already awoken Europe's "nationalist demons." To save the euro and the union, he suggested replacing austerity with "solidarity" via a grand redistribution to the crisis countries. Yet the northern countries, some of which already subsidize the south through the European Union's internal budgeting, have little appetite for this kind of gesture, especially since they see the problems as entirely of the south's making.
In the long term, these problems will only worsen. The southern countries have built up heavy pension obligations to future retirees, and their economies tend to do a relatively poor job encouraging entrepreneurship and innovation. In general, they face bigger risks and smaller opportunities than their neighbors to the north. Even if the euro survives the current crises, its prospects will continue to dim.
As I have written here before, the euro was supposed to bring the countries of the European Union closer together, facilitating commerce and synchronizing business cycles. But because the euro also lengthens and deepens economic crises, it creates an opportunity for those who oppose the EU's founding principles of egalitarianism and mutual respect.
One of my old academic advisers, Martin Feldstein, predicted in 1997 that the euro would "change the political character of Europe in ways that could lead to conflicts." He added: "War within Europe itself would be abhorrent but not impossible. The conflicts over economic policies and interference with national sovereignty could reinforce long-standing animosities based on history, nationality, and religion." Though war is not on the immediate horizon, paring down the eurozone now may be preferable to picking up the pieces later.
SUBJECTS:
