Euro, Meant to Unite Europe, Seems to Rend It

[WestVirginiaRebel]

NY Times:

PARIS — The euro was a political project meant to unite Europe after the Soviet collapse in a sphere of collective prosperity that would lead to greater federalism. Instead, the euro seems to be pulling Europe apart.

As European leaders scramble to present a united front for this weekend’s critical meeting in Brussels, anxiety in Europe is growing, and not just about the euro. The assumptions of 60 years suddenly seem hollow, and the road ahead is unclear, as if the GPS system has gone out of whack.

On the surface, the European Union is an enormous success. It has nearly 500 million citizens and a gross domestic product of more than $17 trillion, larger than that of the United States and more than three times China’s or Japan’s. It is America’s largest trading partner by far, and together the two economies account for roughly half the world’s gross domestic product and nearly a third of its trade.

But Europe is in economic and demographic decline as Asia is rising. The European Union’s share of global trade is steadily dropping, especially in exports. Its aging population is placing huge strains on generous social welfare and pension programs and pumping up sovereign debt in an extended period of flat growth.

Technologically, it is behind the United States, but its pay scales are too high to be an easily competitive exporter.

The current crisis over the euro has deep roots in the imbalances between north and south, rich and poor, export-led and service-driven economies, tied together by a currency but few rules, and those are rarely enforced.

A fix will require fundamental changes in the functioning of the bloc, with more interference in the workings of sovereign states. There would need to be a fiscal union, with a treasury and a finance minister capable of intervening in national budgets, and more unified tax and pension policies. But it is far from clear that the European Union can gather itself to take these fateful steps away from nationalist identities to a truly European model.

“We are today confronted by the greatest challenge our union has known in its entire history,” said José Manuel Barroso, the head of the European Commission. “It is a financial, economic and social crisis. But also a crisis of confidence — in our leadership, in Europe itself, in our capacity to find solutions.”
________

Europe's decline is of its own making. The welfare state chickens have come home to roost.