Tuesday, April 17, 2012

Why the eurozone may yet survive

by Martin Wolf

Financial Times

April 17, 2012

“If the sovereignty of the Union were to engage in a struggle with that of the States at the present day, its defeat may be confidently predicted; and it is not probable that such a struggle would be seriously undertaken ... If one of the States chose to withdraw its name from the contract, it would be difficult to disprove its right of doing so; and the Federal Government would have no means of maintaining its claims directly, either by force or by right.”

Alexis de Tocqueville, author of these words on the prospects for the US, was the shrewdest foreign observer of that country. Yet he failed to foresee the outcome of a civil war. Similarly, over the 10 days that I have spent in the US, I have found that informed Americans believe the eurozone will not survive. That is because they view it as a marriage of economic convenience, as de Tocqueville viewed the US as a marriage of political convenience.

The parallel is inexact, but illuminating. It is inexact, because the eurozone is no country. If it were, the economic stresses to which it is subject would be easy to handle. It is illuminating, because it shows that the survival of any political construct depends on the strength of the centrifugal and centripetal forces at work. In the case of the US, the former were sufficient to persuade the Confederacy to undertake secession, but the latter were sufficient to defeat that attempt.

What, then, can we say of the forces at work on the eurozone?


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