Matt Yglesias

The Punch Europe Needs

Quentin Peel’s analysis of the new EU jobs contains a lot of interesting background, but I’m not sure that the lede is right:

The appointment of Herman Van Rompuy, Belgium’s prime minister, as president of the European Council and Lady Ashton of the UK as European Union “high representative” for foreign affairs is certain to be seen by many as a demonstration of Europe’s inability to punch its weight on the global stage.

Neither is a big political figure with an international reputation. Both are classic consensus-building figures, unthreatening to national European leaders, and unlikely to steal the limelight from their rivals.

I think the idea that the EU could have become a major player on the world stage simply by picking a famous person to be President of the European Council was always a mirage based on fuzzy thinking. If the EU were a country, it would be a very important country. It would have the largest economy in the world, a medium-sized nuclear arsenal, and a military that though considerably smaller than America’s does have some ability to project power on a global basis. Under the circumstances, even the most obscure person in the world would become an important player once he ascended to the top leadership post. But the EU isn’t a country, so it a fortiori isn’t an important country.

The weight-punching issue, viewed in this light, isn’t an issue of personalities it’s an issue of institutions. To punch its weight, Europe needs institutions that facilitate collective decision-making that can put its weight into place. This is why, per Annie Lowrey, the foreign policy job “will end up being the vastly more influential one — Ashton will control thousands of civil servants and a large budget.” Jean-Claude Trichet is one of the most important people on the planet, not because he’s famous, but because the European Central Bank has real responsibilities and the power to do things. Ashton will have some real authority, and that will make her important. Van Rompuy, meanwhile, will be able to wield some influence on the world stage if-and-only-if he’s able to forge a consensus of EU national leaders to back some course of action or another. Under the circumstances, a consensus-builder figure isn’t an alternative to a strong leader—the only way the office he’s picked for can possibly be strong is through consensus-building.

Eurozone Now Enjoying Anemic Growth

(photo by me, available under cc license)

The recession ends in Europe though this isn’t much of a recovery:

The E.U.’s statistics agency, Eurostat, reported that G.D.P. growth in the 16-member euro zone improved by 0.4 percent from the second quarter, following five consecutive quarters of contraction. Growth was still 4.1 percent lower than a year earlier.

The rebound appeared to be powered by Germany. There, G.D.P. growth rose by 0.7 percent from the second quarter, when it was up by 0.4 percent. Compared to a year earlier, German G.D.P. was down 4.7 percent.

That these kind of numbers can signal the end of a recession mostly shows the somewhat arbitrary significance of the number zero. Those are terrible growth numbers, and imply that labor market conditions are getting worse. What’s more, a place like Spain is currently experiencing depression-like conditions and the European Central Bank seems to be looking for any kind of vague excuse to halt expansionary policies. This kind of just-barely-above-zero growth might turn into the ECB’s opportunity to step on the breaks, which would be a terrible idea.

Kaplan: Civil Society Requires Perpetual War

One of the best things about not working at The Atlantic anymore is not counting Robert Kaplan among my professional colleagues. Here’s his take on modern-day Europe:

Europe, having been liberated from nuclear terror at the conclusion of the Cold War, proved unable to muster the gumption to deal with Yugoslavia on its own, or, as the case of Afghanistan shows, to demonstrate much enthusiasm for any great collective effort. Which leads to the question: What does the European Union truly stand for besides a cradle-to-grave social welfare system? For without something to struggle for, there can be no civil society—only decadence.

Thus, with their patriotism dissipated, European governments can no longer ask for sacrifices from their populations when it comes to questions of peace and war. Ironically, we may have gained victory in the Cold War, but lost Europe in the process.

Spencer Ackerman observes that there’s something rather crazy about the view that the Cold War was waged “so that European soldiers would one day become our cannon fodder.” One might further note that it’s not at all clear that the American public has any real desire to sacrifice anything in Afghanistan. It seems to me that one of the key props of the wars in both Iraq and Afghanistan has been the consensus on both the right (Bush, The Weekly Standard) and the center (Blue Dogs, The Washington Post) that it’s not necessary to raise hundreds of billions in tax revenue in order to pay for hundreds of billions in war expenditures. By far the fastest way to end the war in Afghanistan would be to ask General McChrystal’s staff to produce a plan to make it deficit neutral and find sixty votes in the senate for his financing plan.

In a larger sense, however, Kaplan is merely highlighting the fundamental difference between neoconservative thinking and thinking undertaken by people with a moral compass. As Alex Massie says, present-day Europe’s state of peace, prosperity, and physical security is a good thing. Neoconservatives, however, see war and death as good things. Irving Kristol told Corey Robin that market-oriented conservatism is too “boring” (”The notion of devoting your life to it is horrifying if only because it’s so repetitious. It’s like sex.”) so you need to inject some death and destruction into the mix to keep things interesting.

The world would be a better place if people looking for cheap thrills would stick to the black metal scene or maybe take up extreme sports rather than foreign policy punditry. But the point is that it’s extremely dangerous to take advice from people with this mindset—they’re not even trying to enhance the country’s security, they’re trying to embroil the country in wars.

Europe’s China Problem

Paul Krugman has a wise column about the havoc being wreaked by China’s refusal to let its currency get more expensive relative to the dollar. Krugman thinks we should be trying to do something about this. But as Dan Drezner observes, though China’s dollar-linkage policy is a problem for us, it’s a much bigger problem for Europe and other developing countries:

As a matter of direct economic interest, however, why haven’t the Europeans and East Asians been screaming bloody murder about this? China’s policies are forcing them to take actions they don’t want to take — so why aren’t they complaining more loudly about this?

Why?

Optimistically, it’s been my experience that members of other countries tend to have a better appreciation than America does that making loud public demands is often a counterproductive diplomatic approach. But one has to fear that the real culprit here may be the European Central Bank’s weird deflationary bias.

What is the European Central Bank Thinking?

Willem Buiter has an excellent post up at the FT asking, basically, why on earth the European Central Bank is sitting on its hands while the Euro area undergoes inflation. He points out that its attitude toward deflation is both dumb and in violation of its legal mandate under the treaty establishing it:

The asymmetry in the response of the ECB to inflation rates above the level deemed consistent with price stability in the medium term, as opposed to inflation rates below that level is staggering and poses a material risk to the independence of the institution. [...] The ECB is violating its price stability mandate by tolerating, aiding and abetting deflation in the Euro Area.

Buiter observes that recent changes in the relative position of the “core” vs “headline” inflation rate give us a case study in this asymmetry:

When the headline rate was high but the core rate was below the ECB’s long-term 2 percent target, the ECB emphasized the headline rate and tightened monetary policy. But now that the headline rate is negative, the ECB chooses to emphasize the core rate and decline to ease further. I would note, in addition, that even the core rate is substantially below the ECB’s self-proclaimed target.

When I was in Germany, my group had the opportunity to speak with Bundesbank President Alex Weber. Unfortunately, the discussion was off the record. But suffice it to say that in keeping with stereotype, rather than in keeping with the actual legal mandate of the ECB, Weber’s point of view is very much that this kind of asymmetry is appropriate and he was very committed to the idea that the purpose of central bank independence is to allow one to be indifferent to the human consequences of this kind of commitment to low inflation at all costs. That really doesn’t seem correct to me. Among other things, as Buiter says it seems to me that this behavior is actually threatening the ECB’s independence. It’s one thing to go against a plain reading of your legal mandate. And it’s one thing to allow employment and production to become depressed. But to do the two simultaneously is willfully playing with fire.

The rubber hasn’t really hit the road on this issue yet since the recession’s not that bad in France and Germans are maniacal about inflation. But things are really falling apart in Spain and Ireland and the Germans are probably looking at a big run-up in unemployment soon, too.

Czechs Likely to Ratify Lisbon Soon

The last real chance for Euroskeptics to defeat the Lisbon Treaty would be for Czech President Vaclav Klaus to refuse to sign the thing. In theory, a lone holdout can sink the treaty. In practice, the Czech Republic can’t hold off all the pressure from the rest of Europe. But all the Czechs would really need to do is delay signing the thing until the UK’s general election, at which point David Cameron’s Conservative Party will almost certainly come in. The Tories have promised to hold a referendum on Lisbon; but only if it hasn’t been ratified by all 27 EU members already. Now, though, it looks like the Czechs are going to give in to pressure to move quickly and head the Tories off at the pass:

The Czech PM, Jan Fischer, has told EU leaders he fully expects his country to ratify the EU’s Lisbon Treaty by the end of this year. [...] The Czech Republic’s Europe Minister, Stefan Fule, told the BBC he thought the Czech ratification could come in “weeks rather than months”.

Good news, I would say.

Tony Blair for EU Prez?

If the rest of Europe can lean on the Czech Republic to sign the Lisbon Treaty, Europe will be destined to get a President—a new office that’s being created. A lot of the early buzz seems to be focused on Tony Blair, but that seems pretty misguided to me. For one thing, he’s from a center-left party at a time when the center-right parties are generally ascendant in Europe and specifically won the European Parliament elections. Insofar as part of the idea of Lisbon is to create more democratic legitimacy for EU institutions it seems to me that it makes sense to try to have the presidential selection follow the parliamentary elections and pick someone from a European People’s Party or else the centrist/liberal ALDE group that holds the balance of power. Second, it seems that it would be weird to pick someone from a non-Euro member and generally Euroskeptical country. Third, I think someone from a small country would make more sense—someone for whom the job could count as a promotion, rather than a swansong.

Fortunately, I have an ideal candidate in mind. Jan Peter Balkenende. He’s been Prime Minister of the Netherlands since July of 2002, but he’s only 53. He’s a Christian Democrat, but he’s worked with liberals and with social democrats in different coalitions. The Dutch are very much at the heart of the European project and also have strong ties to the United States. Yes, yes, he’s an obscure figure but that’d be part of the point. It’d be an opportunity for a seemingly talented, relatively young politician from a small country to make something out of the office.

Democracy Promotion

For all the talk of “democracy promotion” in the US political debate, there’s very little acknowledgment that the EU expansion process has probably been the most successful democracy promotion endeavor anyone’s ever come up with. See, for example, what lies in store for Croatia now that Slovenia’s no longer holding up their accession process:

It is certainly a big leap forward for Croatia after months in which talks had stalled, thanks to the veto by Slovenia.

Now that the joint border dispute appears to be close to a resolution, talks are once again under way.

Croatia still has some work to do though – its fight against corruption, the efficiency of its courts and public administration bodies, and co-operation with The International Criminal Tribunal for the former Yugoslavia all present considerable challenges.

The carrot of EU membership is tasty enough that it can actually force incumbents in transitional states to make serious efforts on these issues. Absent that kind of carrot, the tendency is for democracy to be a useful slogan for opposition movements that gets dropped by whoever’s in power at the moment.

Europe in Perspective

Signing ceremony for the Treaty of Rome, 1957

Nicholas Kulish’s article on European unity under strain at time of economic crisis is interesting reading, but the headline “Goal of Unified Europe Falters Amid Downturn” seems overblown. Any time you read about the E.U. project running into trouble, it’s always worth asking “compared to what?” It’s not as if there are tons of examples of broad multi-national unions proceeding with smooth sailing, or even that many examples of enduring multi-lateral free trade zones.

Someone sitting around in the late 1940s speculating that Europe was just doomed to endless rounds of self-destructive warfare that would inexorably grind away at the greatest accumulation of wealth on the planet wouldn’t have been making a crazy conjecture. And as recently as the early 1990s, it was common to hear that European political institutions—which were a good deal looser then than they are today—were likely to unravel absent the background of the Cold War. Indeed, in 1990 John Mearsheimer’s “Back to the Future: Instability in Europe After the Cold War” argued that the future of the continent would “probably not be as violent as the first 45 years of this century, but would probably be substantially more prone to violence than the past 45 years.”

Obviously, things went better than that! And nowadays though it’s not clear that there’s any feasible way for European integration to proceed much further in the short-term, it’s very hard to imagine it substantially rolling backward either.

Iceland Takes New Steps Toward EU Membership

James Joyner writes about Iceland’s continued march to EU membership. This is brought about in part because the financial meltdown has made EU membership look better on the merits, in part because the financial meltdown has brought left-wing parties to power, and in part because the financial meltdown has just changed public opinion. Still, mass opinion is rarely all that Europhilic and there remains some chance that the public will reject accession in a referendum. EU leaders, meanwhile, seem to be welcoming the idea of expansion to a tiny rich country after so many contentious fights about the accession of medium-sized medium-income Eastern European countries.

The EU has a ton of problems, running the gamut from a nutty decision-making structure to the fact that voters seem to hate it. But when you step back and think about it, it’s really an enormous human achievement relative to where things were 60 or 70 years ago or to what anyone would have thought possible back then. And for all its problems, the EU keeps moving by fits and starts to become both broader and deeper and I see no real reason to think either trend will actually reverse. Most likely, some of the problems will get resolved and that, combined with generational turnover, will build a more EU-friendly public in the future.

Deflation in the Eurozone

Ruining everything

A shocking number of American commentators and an even larger number of European policymakers continue to be worried about the specter of possible future inflation even as the opposite is happening right before our eyes:

The eurozone’s annual rate of inflation turned negative in June for the first time since the single currency was introduced in 1999. Prices in the 16-nation zone fell 0.1% in the past year, Eurostat said. The inflation rate had been 0% in May. Inflation in the eurozone has been dragged down by lower energy and food prices, and by falling demand for goods from companies and households.

This is, simply put, a disaster. In particular, the devastated economies of Spain and Ireland are never going to recover with this sort of thing going on. And that, in turn, is only going to make things worse for Germany and the rest of them. From the get-go the European response to the recession has been very misguided. And to a striking extent, the American debate continues not to recognize that the European Union has surpassed the United States of America in terms of the scale of its economy. Jean-Claude Trichet is the most important central banker in the world, and it’s extremely difficult for anything Barack Obama and Ben Bernanke try to do to work if the Europeans make poor choices.

Visions of an Unstimulated Land

Somewhere in Barcelona (Yglesias Photo)

In Europe, the shoots are not looking very green:

Some private economists are even predicting that the American economy will resume growth in the fourth quarter, while Europe’s economy is expected to remain in recession well into 2010, after contracting an estimated 4.2 percent this year compared with an expected 2.8 percent decline in the United States.

“The shock originated in the U.S., but Europe is paying a higher price,” said Jean Pisani-Ferry, a former top financial adviser to the French government who is now director of Bruegel, a research center in Brussels.

As Tim Fernholz says, this is probably the closest we’re going to get to a natural experiment about different approaches to dealing with the huge negative demand shock inflicted by the collapse of the housing bubble. In the United States, we’ve had aggressive fiscal policy and extremely aggressive monetary policy. In Europe, monetary policy has been more restrained and fiscal policy has been much more restrained. Meanwhile, US growth looks set to recover faster. And the UK, which has been more aggressive than other European countries, also appears to be pulling out of the tailspin faster than Europe.

All that said, this is an interconnected world we live in, and it’s possible that the dead brown shoots emanating from Europe will wind up sparking a secondary economic collapse and pull us back down.

The Obama Effect Abroad

An incredulous Cliff May offers up what I guess he takes is a reductio ad absurdum argument:

Over on Contentions, Jennifer Rubin notes the column by Eugene Robinson contending that Obama’s Cairo speech led to the encouraging results in Lebanon’s elections.

I wonder: Does Robinson also believe that Obama’s visit to Buchenwald led to the right-wing victories in the European elections?

Look. Obviously the things that Barack Obama says and does are not going to be the main factor in foreign electoral outcomes. But insofar as the relationship with the United States is an important consideration for many countries, then it seems plausible to conjecture that the basic posture of the US President will have some systematic impact. In particular, it seems totally plausible to speculate that a more popular American president who engages with the views of foreigners is going to reduce the appeal of political movements that are skeptical of the United States and increase the appeal of movements that are more friendly to US influence. Both the March 14 Coalition in Lebanon and the European People’s Party fit the “more friendly to US influence” bill.

A Strange Victory for Capitalism

Joseph Daul, MEP

I remember when Nicholas Sarkozy got elected President of France and a number of American commentators started suddenly and strangely crowing about how “even France” was recognizing the virtues of Americanism and American-style capitalism. Since taking office, of course, Sarkozy has done exactly what an informed person would expect him to do—governed like the Gaullist he is, just as the majority of presidents of post-war France have been. And French policy has continued to be dominated by French nationalism and statist economics. Now along comes Anne Applebaum with a continent-wide version of this fallacy, proclaiming a win by the center-right European People’s Party bloc in a low-turnout European Parliament election to be a verdict on socialism in which “capitalism triumphed.”

It seems to me that if you want to read these elections as an ideological triumph for anyone, though, you should view it as a triumph for the ideologies that actually won the election. The EPP is an amalgamation of Christian Democratic parties with French Gaullists. Nobody in the United States would recognize their agenda as constituting “capitalism” except in the broad sense that Europe’s Social Democratic parties also believe in capitalism. The European parliament actually does contain a bloc of liberal parties—the Alliance of Liberals and Democrats for Europe—which includes capitalism-oriented parties. It’s the third-largest bloc, treaded water in the elections, and has always been the third-largest bloc, reflecting the fact that neoliberal economics is not very popular in Europe.

Underlying the entirety of these kind of analyses seems to me to be a misunderstanding of why Europe tends to have a more elaborate welfare state and a more regulated labor market. The presumption behind columns like Applebaums seems to be that Socialist, Social Democrat, or Labor parties are constantly winning elections. In reality, most countries have mostly been governed by center-right coalitions. But the parties of the European right are quite different from their American counterparts. The Tories in the UK are probably the most similar, but even they don’t dare admit to any qualms about government-run health care. Sarkozy does things like call for “a better-regulated form of capitalism with a greater sense of morality and solidarity,” and I’m guessing it’ll be a very long time before Barack Obama makes “solidarity” one of the cornerstones of his agenda. Angela Merkel pushes for major cuts in carbon emissions. It’s like they live on a whole different continent or something.

Social Democrats Hammered in European Parliament Elections

European Parliament elections are contested country-by-country by national parties. In other words, in France the Parti Socialiste runs against the UMP, and then separately in Germany the Social Democrats run against the Christian Democrats. But the MEPs do sit in cross-national blocs. And in the voting that finished up this weekend, the cross national Party of European Socialism, representing the mainstream center-left parties of Europe, got really hammered. The Greens picked up seats. The far-right picked up seats. The Euroskeptics picked up seats. And the main center-right bloc, called the European People’s Party, picked up a bunch of seats. The ALDE bloc of centrists and liberals basically held even. And the social democrats lost out big time. This, courtesy of the BBC, is what the new European Parliament will look like:

And here’s how it went in 2004:

It’s not clear that this has any dramatic implications for EU issues as such, since ultimately the balance of power remains the same. But the terrible result the Labour Party put up in the UK—third place—appears to be deepening the political crisis there. Meanwhile, with American conservatives complaining about incipient socialism in the US at the very time Europe is moving toward the right, can the day be far off when conservatives start threatening to move to Sweden?

Nobody Cares About the European Parliament; But They Should!

European Parliament Building

Henry Farrell has a great European Parliament Elections 101 post up, which includes this interesting observation:

Elections to the Parliament tend to be, as Simon Hix describes it, ‘second order elections’ – that is, elections in which voters punish or reward (with the emphasis on the former) their current national governments. This disconnect is highly annoying for fans of European federalism, who would like to see the European Parliament providing the EU with a patina of democratic legitimacy. But this is unlikely to happen as long as voters don’t care about the European Parliament, which apparently they don’t. What is interesting, is that the political science evidence suggests (again thanks to Hix and his colleagues) that the European Parliament is becoming more and more like a national parliament in some ways, with Members of the European Parliament voting on the basis of cross-national ideological alliances much more than shared national interests. So there is an important disconnect here, which should be of some theoretical interest – that even though MEPs are still not regarded as representatives in a ‘real’ Parliament, they behave as if they were when they get to Strasbourg and Brussels.

I increasingly worry that the fairly problematic institutional framework that governs the European Union is going to be a problem for all of us. Without anyone really digesting this information, over the past 10-15 years the United States has been eclipsed by the EU as the world’s most significant economic actor. But the EU in various ways lacks the capacity and legitimacy needed to respond in a forceful way to the global economic meltdown, and the European Central Bank appears to feel an overwhelming need to establish credibility as an inflation-fighter.

It’s pretty conventional in American punditry to write about the indispensability of American leadership. But normally the point is that we’re indispensable because we’re so damn big. Now it’s more like we’re indispensable because even though we’re only second-biggest, the other guys can’t really do anything. It’s not a good situation.

Regional Variance in Unemployment is High

Los Angeles, I'm Yours

In a very simple model of how the United States works, we’re a single country composed of a single labor market, and would-be workers should effortlessly migrate from places where there are no jobs to places where firms are looking to hire. In the real world, things are quite different, as this list of unemployment rates by metro area makes clear. Ryan Avent observes that “Rates differ dramatically across metros. There is a surprisingly large number of metro areas with unemployment at 7% or below.” Indeed, just looking at big cities, in Los Angeles/Long Beach/Santa Ana the unemployment rate is 10.1 percent whereas in Boston-Cambridge-Quincy it’s just 7.2 percent, in Dallas it’s 6.6 percent, and in Washington/Arlington/Alexandria it’s 5.6 percent. In greater Washington, unemployment has increased 2.6 percentage points since April 2008; in Los Angeles it’s 4.5 percentage points.

In theory, people should be moving in droves from LA to Washington, eliminating the difference, and ultimately boosting overall employment. In the real world, of course, households and families don’t operate on a frictionless plane of labor mobility that perfectly matches people with job opportunities. And part of the story of this recession is that because of the housing link, people are having unusually difficulties with relocation. That’s going to make recovery harder. A lot of people in Michigan and the Inland Empire, in particular, are going to find that they can’t really afford to leave where they are in search of better opportunities elsewhere.

This is, however, going to be an even bigger issue in Europe. On paper, the European Union has created an American-style integrated continental market. In reality, however, they still speak Spanish in Spain and Dutch in the Netherlands, and different countries remain different countries. Thus to an even greater extent than in the United States, Europe finds itself with limited labor mobility and a labor market that doesn’t live up to the rapidly transition ideal. That’s one very good reason to believe that European recovery will be slower than what we see in the United States.

US, EU Unemployment Rates Converging

CEPR observes that America’s days as a bastion of low unemployment seem to be over:

The authors observe that in recent years “the Organization for Economic Cooperation and Development (OECD), the International Monetary Fund (IMF), and other international organizations all praised the U.S. unemployment performance and urged the rest of the world’s rich countries to emulate the ‘flexibility’ of the U.S. model” and that it may be time to re-think this. That said, the couple of European officials I’ve discussed the current economic situation with say that the less-flexible model in their countries should reduce the scope of layoffs during the downturn, but the more flexible US model should lead to a quicker employment rebound. Their way, in other words, looks better in downturns—especially in severe ones—but less good at other times.

Eurozone Deficits on the Rise

This will come as no surprise, but the budget deficits in the Eurozone are rising in the face of the recession:

The deficit in the 16 countries which use the euro increased to 1.9% of GDP, against 0.6% in 2007, with Ireland’s deficit the highest, at 7.1%. [...] Deficits look set to continue rising. The Commission has forecast that the eurozone’s deficit will reach 4% of GDP in 2009, the highest yet, and 4.4% in 2010.

This is all a bit of a mess, if you ask me. Ireland’s deficit is way too high, but 1.9 percent of GDP on average is way too low considering the extent of the economic downturn. Better policy coordination would have had more stimulative deficit spending in general, but somewhat less in the worst-afflicted areas as other places would be able to help Ireland out, much as Florida and Michigan aren’t totally on their own in America’s recession. But of course that’s tricky to pull off institutionally.

The EU and the Crisis: Beginning of the End, or End of the Beginning

Adam Blickstein comments on tensions within the European Union over how to grapple with the economic crisis:

On the one hand I want to say the financial crisis is the first major test of the post-enlargement, modern EU and will help determine how Europe will grow institutionally in the future. But on the other hand worry that European integration may have moved too fast too quickly without a truly robust structure so that when real hard times like now hit, it threatens the stability of the entire system. In other words, while this test will tell us a great deal about the present and future of the EU, it might not only merely be a test of pan-European harmony but also reveal a destructively discordant note in the basic structure of the European project.

Whereas even up to two years ago, fuller integration was seen as mutually beneficial to both the”net givers” (Britain, France, Germany) and “net takers” (Poland, Bulgaria, Spain), that ideal has clearly been disintegrated in the current financial climate. The growing divisions in Europe and the across the board economic suffering of countries from west to east may be exposing the mutually destructive nature emanating from the lack of protective economic compartmentalization in the basic political and financial foundation of the EU. It will be interesting to see if Britain’s greater economic autonomy allows it to weather the economic storm more adroitly than their continental counterparts, despite of course ostensibly a more dire economic reality.

Nobody is talking about it, but you could definitely sketch a scenario in which the crisis leads to the breakup of the euro and a substantial collapse of the European Union and the entire European “project.” On the other hand, you can also sketch a scenario in which the reverse happens. Public opinion in most European countries has been hostile to deepening European political integration but also unwilling to try to undue European economic integration. That’s created the current scenario in which Europe needs more policy coordination than the formal institutional structure in Brussels permits. That could be a recipe for disaster. But it could also be a recipe for statecraft and the creation of a stronger, more consolidated Europe.

A big part of the history of the past 100 years has to do with the fact that the logic of the situation in Europe points to some kind of large, integrated, German-dominated political and economic unit on the continent. But other countries haven’t liked that idea, and some—primarily England and France—have been in a position to do something about it. We’re now reaching a point, however, where the bulk of the European “periphery” would probably welcome their new German overlords, insofar as the Germans are willing to do some bailing out. Similarly, I’m sure the British, would be perfectly happy to see such a thing happen with them just sitting on the sidelines. It sort of becomes a question, at this point, of whether or not the Germans really want to play leader.

Since the movie’s coming out Friday, I’ve got Watchmen on the brain and this seems to be the choice facing the Germans:

[A]ll the whores and politicians will look up and shout “Save us!” —and I’ll look down and whisper “No.” They hade a choice, all of them. They could have followed in the footsteps of good men like my father or President Truman. Decent men who believed in a day’s work for a day’s pay. Instead they followed the droppings of lechers and communists and didn’t realize that the trail led over a precipice until it was too late. Don’t tell me they didn’t have a choice. Now the whole world stands on the brink, staring down into bloody hell, all those liberals and intellectuals and smooth-talkers—and all of a sudden nobody can think of anything to say.

Well, okay, Angel Merkel almost certainly won’t start referring to her Spanish and Irish counterparts as whores or lechers. But you could see her adopting this basic attitude.

Eurostimulus

“Giant Stimulus Plan Proposed for Europe” reports the AP:

The European Commission said Wednesday that it wanted to European Union governments to jointly combat the mounting economic slowdown with measures costing about 200 billion euros or $256.22 billion.

That’s good. I had worried that the EU fiscal stability pact that was part of the agreement that created the Euro would prevent most EU members from engaging in this sort of thing and, indeed, force them into contractionary fiscal policy. It’s worth saying, though, that 200 billion euros, while nothing to sneeze at, isn’t actually a particularly large stimulus package. That’s about half of what Barack Obama’s talking about, and the EU is bigger in terms of both population and GDP.

As One Stand Together

After an initial flurry of shadenfreude, it seems to have dawned on Europeans over the past week that they are, if anything, in an worse situation than the United States is. In part, this is because it seems that their banking and financial sector is, contrary to stereotype, actually less regulated than ours. And in part this is because Europe has constructed an economy that’s pretty highly integrated but doesn’t have a central EU institution with the capacity to deal with a problem of this scope. The European Central Bank lacks the authority, and there’s no European Central Finance Ministry to turn to. Now, though, Finance Ministers are meeting in Luxembourg to try to find a common approach.

On the other hand, just because Europe needs a common approach to the problem doesn’t mean they’ll actually get one. The EU decision-making procedures are pretty dysfunctional so things could go badly wrong. But it’d be hard for a bunch of different countries to maintain a currency union in the midst of a banking crisis if the countries are taking wildly different approaches and having dramatically different levels of success. Thus, the crisis would seem likely to either prove to be the impetus for further integration or else the impetus for disintegration of the existing supranational bloc.