“The Owl of Minerva takes flight only as the dusk begins to fall.” Or, to speak more directly than G W F Hegel, we can only become wise about the direction of history late in the day. The aphorism is pertinent to the euro crisis. Is this the twilight hour for the single currency or are the clouds over the euro no more than an early morning mist in pan-European history? The euro’s fate will look inevitable in retrospect (that is Hegel’s point), but for now the balance of historical forces is far from clear.
The technicalities of the euro crisis are bewildering, even to financial professionals. There are rescue funds constructed with baroque techniques of financial engineering, arcane details of labor market reforms and political feuds that have festered for decades. But something much bigger is at stake – whether or not there should be, in the words of Angela Merkel, “more Europe.” If so, the crisis can be resolved relatively simply: lenders would accept the losses caused by their past mistakes and errant governments would promise to play by the fiscal rules henceforth.
But should there be more Europe? Most British politicians think not and most mainstream continental politicians are in favor, if only warily. The reasons on both sides are fundamentally Hegelian. It is a question of which historical forces should prevail.
The anti-euro case is based on one of the strongest forces of the last few centuries – nationalism. The sentiment is sometimes expressed in economic terms, as when the previous British government rejected membership of the monetary union. A multinational currency always goes directly against the nationalist flow, even where the economic case for it is strong. In order for the euro to succeed, Germans must abandon hopes of duplicating their super-strong national currency and Greeks and Italians must either abandon longstanding traditions of loose fiscal behavior or learn to tolerate interference from EU authorities.
On the pro-euro side, two grand historical forces have provided most of the support for both the European Union and its currency. Both are faltering.