The words “core” and “periphery” have become standard terms to describe the winners and losers in the euro crisis. But how could anyone with the slightest sense of history, or knowledge of art and culture, call Italy or Spain peripheral to Europe, while placing Finland and Slovakia, or even Germany and Holland, at Europe’s core?
As a part-time resident of Italy, with a home 100 km from Rome, the center of two millennia of European civilization, I could not be satisfied with this trite answer. Speaking to friends and neighbors in Italy this summer and observing the behavior of Europe’s leaders, I have been struck by a more interesting, and disturbing, explanation of the core-periphery split. These terms do not refer to the past or the present, but to plans for the future. Core and periphery are not geographic or historical descriptions, but euphemisms designed to legitimize permanent economic and political inequalities among the nations of Europe.
With every step toward a resolution of the crisis, the peripheral countries have lost political autonomy, economic opportunity and national self-esteem, while the core countries, especially Germany, have been enriched and empowered. By creating conditions in which the interest rates paid in Italy, Spain and the other Mediterranean countries are much higher than they are in Germany and its northern allies, Europe has imposed a large and permanent economic handicap not only on the governments of southern Europe but also on their private businesses and households.
Even the most profitable Italian businesses and the most solvent Italian homeowners are forced to pay double or even triple the interest rates of their German or Dutch counterparts. When Italy had a separate currency from Germany, this interest inequality did not matter because the lira was periodically devalued, thereby reducing the real cost of debt. But while the euro survives, the widening disparity in financing costs provides continuous subsidies for German companies, while stunting the competitiveness of Italian and Spanish businesses with terrible implications for job creation and economic growth.
Until recently, there has been surprisingly little protest in the peripheral countries against this manifest injustice. People seemed to swallow whole the German and northern European, narrative that presents Mediterranean economic inferiority and political subservience as natural consequences of geography and national stereotypes. In Italy, however, a change of mood became noticeable after Mario Monti, the country’s unelected but universally respected prime minister, started pushing back against German reform demands at the EU summit on June 29. In the past few weeks, this resistance has been gaining strength.