Wednesday, March 13, 2013
Germany has one last chance to really save the eurozone
March 13, 2013
'The crisis of the euro is over. Crisis in the euro is strong." Thus a senior French politician. A looming collapse in Cyprus, which eurozone leaders will discuss after the European Union summit dinner in Brussels tomorrow, may yet prove him wrong in a matter of days. My hunch, though, is that he is probably right, at least for a year or two.
Germany and the European Central Bank have done just enough to convince the markets that the eurozone will survive, for now. But many eurozone economies remain on the critical list. Some have made heroic efforts, with results already visible. In Spain, for instance, unit labour costs are already down and exports are at a 30-year high. The pain has been immense, with 50% youth unemployment and house prices falling between 30% and 40%, but somehow people are getting through it. This has had political spin-off effects – literally so, encouraging Catalans to want to spin off from the Spanish state – but in terms of conventional party politics, the centre has held. There has been very little xenophobic rhetoric and virtually no scapegoating of immigrants.
What has happened in Spain is remarkable testimony to the resilience of the European political mainstream, with its almost instinctive commitment to moderation, bound up in a deep-rooted desire to remain part of a larger European project. But for how long, oh Lord, how long? For how many more years can these societies endure such levels of socioeconomic stress before their democratic politics lurch to extremes?