Friday, December 16, 2011

The EU's Future: No War, but No Growth

Just about 15 years ago, Martin Feldstein, the Harvard economist and former adviser to Ronald Reagan, wrote that the coming of a common currency to Europe promised “incompatible expectations about the sharing of power.” There were future conflicts in play, he argued, making an intra-European war “too real a possibility to ignore.”
That is how John Vinocur starts his latest International Herald Tribune article.
Over-the-top, Reaganite musings, some said. Neither the great bang of war nor its whimpers has materialized.

Still, without a shot being fired, Europe and its project to achieve power and greatness is in many ways demoralized, even devastated.

After another in a series of debt and deficit crisis summit meetings last week, the European Union, still uncertain about eliminating the markets’ disbelief in its probity, has locked itself into a survival plan that turns the euro zone’s back on growth to seek stability alone.

The results of the decision: A perspective of stagnation as the culmination of 18 months of fibbing and stalling about Europe’s financial and economic reality that markets saw through and may continue to doubt. And a gap in enthusiasm (in truth there is none) between the E.U.’s common currency and its citizens — a Brussels official describes Europeans regarding the euro as a “convenience” rather than a necessity — at a moment when the euro zone’s leaders have chosen to confront a likely recession with savings and rigor but no parallel plan for a surge in activity.

… Mr. Feldstein’s war, of course, has not occurred, and the achievements of the E.U.’s common currency are real. But he had a sharp sense for trouble.

… So: The E.U.’s situation about a decade after the coming of the euro is, no war, but no hard-wired plan for growth. And now, after the French fade, an absence of any member standing up as expansion’s advocate while the chancellor talks about a marathon of “stabilizing” to last a decade.