MONETARY POLICies
working as maids or gardeners for the Germans, all of whom now have their second homes in the sunny south.
The U.S.E. has actually gained some members. Lithuania and Latvia stuck to their plan of joining the euro, following the example of their
neighbor Estonia. Poland,
under the dynamic leadership of former
Foreign Minister Radek
Sikorski, did the same. These new countries are the poster children of the new Europe, attracting German investment with their flat taxes and relatively low wages.
But other countries have left.
David Cameron—now beginning his fourth term as British prime minister—thanks his lucky stars that, reluctantly yielding to pressure from the Euroskeptics in his own party, he decided to risk a referendum on EU membership. His Liberal Democrat coalition partners committed political suicide by joining Labour’s disastrous “Yeah to Europe” campaign.
Egged on by the pugnacious London tabloids, the public voted to leave by a margin of 59% to 41%, and then handed the Tories an absolute majority in the House of Commons. Freed from the
red
tape of Brussels, England is now the favored destination of Chinese foreign direct investment in Europe. And rich Chinese love their Chelsea apartments, not to mention their splendid Scottish shooting estates.
In some ways this federal Europe would gladden the hearts of the founding fathers of European integration. At its heart is the Franco-German
partnership
launched by Jean Monnet and Robert Schuman in the 1950s. But the U.S.E. of 2021 is a very different thing from the European Union that fell apart in 2011.
It was fitting that the disintegration of the EU should be centered on the two great cradles of Western civilization, Athens and Rome. But George Papandreou and Silvio Berlusconi were by no means the first European leaders to fall victim to what might be called the curse of the euro.
Since financial fear had started to spread through the euro zone in June 2010, no fewer than seven other governments had fallen: in the Netherlands, Slovakia, Belgium, Ireland, Finland, Portugal and Slovenia. The fact that nine governments
fell in less than 18
months—with another soon to follow—was in itself remarkable.
But not only had the euro become a government-killing machine. It was also fostering a new generation of populist movements, like the Dutch Party for Freedom and the True Finns. Belgium was on the verge of splitting in two. The very structures of European politics were breaking down.
Who would be next? The answer was obvious. After the election of
FX
Nov. 20, 2011, the Spanish prime minister, José Luis Rodríguez Zapatero, stepped down. His defeat was such a foregone conclusion that he had decided the previous April not to bother seeking re-election.
And after him? The next leader in the crosshairs was the French president, Nicolas
Sarkozy, who
was up for re-election the following April.
The question on everyone’s minds back in November 2011 was whether Europe’s monetary union— so painstakingly created in the 1990s—was about to collapse. Many pundits thought so. Indeed, New York University’s influential Nouriel Roubini argued that not only Greece but also Italy would have to leave—or be kicked out of— the euro zone.
But if that had happened, it is hard to see how the single currency could have survived. The speculators would immediately have turned their attention to the banks in the next weakest link (probably Spain). Meanwhile, the departing countries would have found themselves even worse off than before. Overnight all of their banks and half of their nonfinancial corporations would have been rendered insolvent, with euro-denominated liabilities but drachma or lira assets.
Restoring the old currencies also would have been ruinously expensive at a time of already chronic deficits. New borrowing would have been
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