Greece may vindicate Europhiles, not Euroskeptics

February 15, 2010

It isn’t just the Sophocles connection that makes it easy to think of Greek fiscal woes as a tragedy in the making. A chorus of euroskeptics has been chanting a persuasive ode of despair. They wail that a currency union without a fiscal union is always doomed. The no-bailout clause, the cheating Greeks and the mean spirited Germans — woe, woe, woe are the euro zone and the euro.

The skeptics interpret each hesitation as a sign of trouble. So they gloat that the European Union’s statement last Thursday was weaker than hoped and the market was unexpectedly skeptical. But while their assessment is almost instinctive, these are no random ululations. Their case is cogently argued, mostly from the western side of the English Channel. The logic is that workers in the euro zone will not take wage cuts or losses on savings, so overpaid or overleveraged members of the single currency cannot hope to restore normalcy. There is also a dark reading of history.

Look at the failures of the Latin and Scandinavian Monetary Unions in the early 20th century.

This tragic chorus predates the euro. The pan-European ideal was widely dismissed as unrealistic from the formation of the European Iron and Steel Community in 1951 onwards.

But Europe has spent six decades getting more united. While the journey has been slow, bureaucratic and often not very popular, there have been few backward steps. The deepest recession since the World War Two probably will not destroy what the fall of Communism strengthened. The peripheral economy drama looks like the sort of challenge the EU has been good at resolving. As with the creation of single market and the single currency, many meetings, some new laws and a bit of money could gradually change long established bad nationalist habits.

Europhiles are generally less rhetorically skilled than euroskeptics. It is harder to wax lyrical about incremental bureaucratic solutions than about the inexorable logic of markets. But the euro zone story may be less an ancient tragedy than a modern bourgeois romance — with a happy ending.

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