What day is this in the euro crisis? It feels like Day 999 with Judgment Day lurking around the corner. George Soros keeps warning that Germany better act or else. Angela Merkel keeps repeating no Eurobonds "in my lifetime," which sounds pretty definitive. German bunds fall. The Greeks unearth a new finance minister. Merkel meets with France's François Hollande on the eve of another make-or-break EU summit. Haven't we heard all this before? Have we experienced any crisis in our lifetime that's taken so long? Bear Stearns, Lehman Brothers and AIG unfolded relatively quickly; hell, the entire narrative of Andrew Ross Sorkin's "Too Big to Fail" covered just a few months.
Given the protracted nature of this crisis, a numbing quality to the punditry has set in, like Novocain to the brain. Those (mainly in Europe or with an interest in the Old World) who have long written about this sound punch drunk and depressed. Those who haven't (mostly Americans) can't quite figure out what the problem is. The former, led by the Financial Times' Wolfgang Munchau and Martin Wolf, have cried, well, wolf so often that now that the beast is sniffling by the door it's a little hard to react. Crying wolf, alas, is a bit like indulging in conspiracy theories: At some point you might be right. In the latter group gather pundits mostly from The New York Times, led by Paul Krugman, who has been paying attention lately but who lets his chronic frustrations with politicians get the better of him. (This is not to say the Times, with the exception of Krugman, has been serious about the euro-zone crisis -- it can't compare to the FT -- just that its U.S. rivals, including The Wall Street Journal, have been even more absent.) The Times today attempts to enlighten us with a curiously bloodless argument from Eduardo Porter about why Germany will ultimately have to step in and save the euro and an op-ed from Citadel's Ken Griffin and the University of Chicago Booth School of Business' Anil Kashyap urging Germany to save Europe by bringing back the deutsche mark. Porter's confidence in Germany is based on the power of German rational self-interest -- that always works -- and Griffin and Kashyap's counterintuitive idea may have merit, though who can tell in an op-ed, but both pieces fail to tangle with the politics of it all, particularly in Germany. In particular, Griffin and Kashyap's scheme feels as if it were brainstormed at a trading desk or a business school.
Meanwhile, European leaders gather for yet another -- that's No. 19 I believe -- summit. Europe hasn't seen a longer stretch of meetings since Metternich reorganized Europe during the Congress of Vienna after the Napoleonic Wars. Perhaps some day we'll get the kind of tittle-tattle and bed-hopping tales from these summits that we got from Metternich et al., but I doubt it: We're talking technocrats here, not randy aristocrats. (Yes, I know, Dominique Strauss-Kahn was a technocrat, so maybe there's hope.) In any case, as Wolf notes, Europe's "weary and disillusioned leaders" are meeting once again. A hash of proposals for, as Wolf diligently recounts, "a banking and fiscal union, via Eurozone bonds, along with greater fiscal discipline, [that] is to solve the difficulties of today's fragile Eurozone." These schemes do not excite Wolf. He has heard them all before. And so, like a bell tolling, he works once more through the problems: "It is obvious that such measures attract supporters of the European ideal and those who want others to pay for the consequences of past mistakes. It is obvious, equally, that such proposals anger and frighten those who think they will then have to subsidize the improvidence of others."
Wolf is a very serious man. The rest of the column consists of suggesting options -- notably federal solutions -- then dismantling them. He essentially concludes that a) real integration and reform won't fly, and b) there's no compromise that will work either. That about eliminates any possibility. To say the least, he lacks Porter's blithe view of German rationality. "Buts" recur in a Wolfian column like thunderclaps of doom. "But," he concludes, "deficit countries should accept that a federal rescue is unavailable. They must look not to summits but to themselves for hopes of salvation."
Oh. Looks bad -- though Wolf sounds dire reading off his laundry list. There are other points of view, often from Americans who, like Porter, have a certain distance from the affair. Economist Scott Sumner at TheMoneyIllusion quizzically wonders why, if the euro was so fatally flawed, wouldn't Europeans be better off with "the monetary regime of the late '90s. Yes, a collapse would be very messy, and perhaps it should be avoided, but let's not ever forget that the system we are trying to save is a bad one, and if we 'succeed' then the euro zone will be condemned to further crises in the future. Maybe not debt crises, but at the very least competitiveness/unemployment crises. So we shouldn't enact other flawed policies to save this flawed one." Sumner works differently from Wolf. He reels off a list of what won't work -- banking and fiscal unions, patching the whole thing together, or, in fact, the entire euro project itself -- with a certain sanguine élan. True, he admits, very important people still support the euro, so maybe he's wrong. But he doesn't think so. He rejects the notion that Europe can evolve into a federal system like the United States, mostly because, with all the peripheral countries, it's a lot poorer than the U.S. That metaphor of the United States of Europe just doesn't hunt, and never did.
Sumner sums it all up in a postscript: "After I wrote this post it occurred to me that more sophisticated euro analysts will view my scenario as simplistic and unrealistic -- no one is seriously contemplating that level of integration. My point was not to predict the future, but rather to provide a warning. Once you start down that road, there will be constant pressure to go further. Quite likely at some point the northern European taxpayers will rebel, and we won't end up with a United States of Europe. The policy will collapse. But why start down a road that will end in failure? The euro zone really only has two options; a more expansionary monetary policy or a breakup. There's no point in looking for alternative solutions."
So are the Europeans too close to the euro or are Americans too distant, too unsympathetic, too ignorant of the project? The latter is generally true of Americans, though that might change quickly if contagion comes barreling across the Atlantic. Americans have, since the launch of the euro, been skeptical of the project (if they cared at all), though rarely for the very evident flaws that now threaten to bring it down. But did that distance, that lack of a common history, provide wisdom and prescience, or simply a caricature to judge and dismiss? It certainly is easier to be clinical and rational about someone else's problems. - Robert Teitelman
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