Time for Plan B How the Euro Became Europe's Greatest Threat

The euro is becoming an ever greater threat to Europe's common future. The currency union chains together economies that are simply incompatible. Politicians approve one bailout package after the other and, in doing so, have set down a dangerous path that could burden Europeans for generations to come and set the EU back by decades. By SPIEGEL Staff


In the past 14 months, politicians in the euro-zone nations have adopted one bailout package after the next, convening for hectic summit meetings, wrangling over lazy compromises and building up risks of gigantic dimensions.

For just as long, they have been avoiding an important conclusion, namely that things cannot continue this way. The old euro no longer exists in its intended form, and the European Monetary Union isn't working. We need a Plan B.

Photo Gallery

3  Photos
Photo Gallery: Europe's Debt and Structural Crises
Instead, those in responsible positions are getting bogged down in crisis management, as they seek to placate the public and sugarcoat the problems. They say that there is only a government debt crisis in a few euro countries but no euro crisis, citing as evidence the fact that the value of the European common currency has remained relatively stable against other currencies like the dollar.

But if it wasn't for the euro, Greece's debt crisis would be an isolated problem -- one that was tough for the country, but easy for Europe to bear. It is only because Greece is part of the euro zone that Athens' debts are a problem for all of its partners -- and pose a threat to the common currency.

If the rest of Europe abandons Greece, the crisis could spin out of control, spreading from one weak euro-zone country to the next. Investors would have no guarantees that Europe would not withdraw its support from Portugal or Ireland, if push came to shove, and they would sell their government bonds. The prices of these bonds would fall and risk premiums would go up. Then these countries would only be able to drum up fresh capital by paying high interest rates, which would only augment their existing budget problems. It's possible that they would no longer be able to raise any money at all, in which case they would become insolvent.

But if the current situation continues, the monetary union will invariably turn into a transfer union, a path the inventors of the euro were determined to prevent.

Democratic Deficiencies

The euro's founding fathers did not anticipate such a crisis, and thus did not include any provisions for it in the European Monetary Union's set of regulations. The euro welds together strong and weak countries, for better or for worse. There is no emergency exit, and there are no rules to follow in an emergency -- only the hope that everything will turn out well in the end. This is why the crises of a few euro countries are a crisis for the euro, as well as a crisis for the European Union, its governments and its institutions. And this is why the euro crisis has suddenly and expectedly mushroomed into a crisis for the political Project Europe, its future and its cohesion.

The fact that the countries funding the bailouts are lacking democratic legitimization is now becoming the greatest impediment to joint crisis management. Gone are the days of subtle debate over whether the European Parliament involves citizens in a just and proportional way in the decisions reached by the European Council, the body headed by the leaders of the European Union member states, and European Commission, the EU's executive. When things get serious, as they are now, decisions will no longer be made in the somewhat democratically legitimized EU bodies, but at the more or less secret meetings of a handful of leaders.

During the German chancellor's and the French president's quiet walks together, and at the behind-the-scenes meetings of discrete central banks, policies are being made that are then handed to the parliaments to rubber-stamp, even though hardly any of their members understand them.

The costly decisions that are ultimately reached by the luminaries of European solidarity don't just affect the citizens of the ailing member states in an existential way; they must also fear for their social security, their jobs and their assets.

The decisions of European politicians are just as troubling for citizens who live, like the Germans, on the sunny side of the union, and are worried that their country is running up debt that could remain on the books into a remotely distant future.

One of the reasons that Europeans are so incensed at their respective governments is that they are not involved in the decision-making process. Another is that they inevitably perceive their political leaders as being motivated by alleged factual constraints and the requirements of the financial markets, without having any plan of their own.

The euro debt crisis has already swept aside two governments, in Ireland and Portugal, and the Spanish and Greek governments could soon follow. Things are also getting precarious for the government in Berlin, where Chancellor Angela Merkel could lose her parliamentary majority in upcoming votes on bailout measures.

Resistance to Austerity Measures

A crack now bisects the continent, running between those countries that need more and more money and those that are expected to pay. With the Greeks frustrated over the Germans and the Germans over the Greeks, the Portuguese, the Spaniards and the Italians, the political peace project of European unity threatens to end in a great economic dispute among the nations.

In the debtor countries, there is growing resistance against the constant barrage of new austerity programs, while the people of the creditor countries are increasingly incensed over the billions in new aid. The "Outraged Citizens" are taking to the streets in Madrid and Athens while the " True Finns" gain strength in the parliament in Helsinki. Some 60 percent of Germans are opposed to a new aid package for Greece, and there is at least as much resistance among the opposition and trade unions in Athens to the government's efforts to rein in spending -- a precondition for additional loans.

Last Wednesday, thousands of Greeks staged a general strike intended to block access to the parliament building, where the new austerity program was being debated. Prime Minister Georgios Papandreou's limousine was showered with oranges, while rocks were thrown elsewhere. The police used tear gas to protect the elected representatives from the people they represent.

To secure payment of the next loan tranche under the European aid package, Papandreou intends to put together another austerity package worth more than €6.5 billion ($9.3 billion) by the end of the month. The protesters outside the parliament building, unwilling to accept the prime minister's course of action, shouted: "Thieves, traitors. What happened to our money?"

How long will citizens in the weak euro countries -- Greece, Portugal, Ireland and Spain -- continue to accept the harsh reforms? And how long will voters in the creditor countries tolerate their own governments taking ever-higher risks to rescue the euro?

Euro Has Become Greatest Threat to Continent's Future

Finland is a country that is often held up as a successful model for other European countries, but the success of the right-wing populist "True Finns," who captured 20 percent of the vote in April's parliamentary elections, came as a wakeup call to the political establishment in Brussels. As the skeptics gain ground throughout the EU, anti-European sentiments are growing in even the core countries of the union, like France and Germany.

The euro, created with the aim of permanently uniting Europe, has become the greatest threat to the continent's future. A collapse of the monetary union would set Europe back by decades, dealing it a blow from which it might never recover, especially with Europe's position already threatened by the fast-growing Asian economies. How is a fragmented Europe to prevail against this new competition?

This is why Europe's politicians want to defend the euro at all costs, and why they are approving one bailout package after the next. They are playing for time, hoping that the markets will settle down and the reforms will take hold.

The business community is supporting their efforts, too. In a major advertising campaign scheduled to run in leading publications this week, top German business executives, including ThyssenKrupp Chairman Gerhard Cromme, Siemens CEO Peter Löscher and Daimler CEO Dieter Zetsche, promote the monetary union and insist: "The euro is necessary." They argue that ailing member states must be assisted financially, and that the common currency is "absolutely worth this commitment."


Discuss this issue with other readers!
3 total posts
Show all comments
Page 1
PHOEVOS 06/20/2011
1. KISS or Keep It Simple Stupid
In Greece's case, there is a very easy solution you know. From its inception the problem has been the cost of debt. Say, as an example, Greece pays 40 Billion euros in servicing its debt. If the exact same amount was applied towards principal repayment instead, in 10 years time the Greek public debt will be close to zero. Using this extreme case of 0% financing, the point is clear: there must be an artificially low and temporary interest rate for Greece good enough to restore its economy and put it back on a growth path. Of course Greece needs to reform as well but trying to implement this present political cocktail of dubious nature, is hardly the medicine needed at this moment. Why have we all chosen the inefficient way to do what needs to be done? It is as if instead of flying from Berlin to Athens in a straight line, the EU has chosen to fly from Berlin to Athens via Hong Kong.
ichorion 06/20/2011
2. The Euro Threat
There is only one solution, there was ever only one solution from the inception of the EURO: a single currency and a single national debt. Without a single national debt where the collective debts of all the member states were taken on to the balance sheet of a European Federal Government the Euro project was designed to fail. And so it has proved, it has failed because there is/was no other solution, however, this solution was always unacceptable to the European nations so we have to accept that the "fall out" will prove grievous to one and all.
Akhenaten 06/21/2011
3. No real crisis!
The Spiegel is now sounding like the Anglo Saxon media, bad mouthing the Euro at every opportunity in order to deflect from their own much bigger catastrophe, the US $ and UK pound sterling, not much better than toilet paper created out of thin air. Yes, we do have problems. The biggest one being the corrupt administration in Brussels, which should be curbed to one third of its size, made to open their account sheets to all the world to see and kicked into shape to get involved only where local community, county, country administrations cannot handle the matter under the SUBSIDIARITY principle. The Greeks should either comply to the austerity measures or be kicked out as the ONE rotten apple in the Euro barrel. There is also a problem of too many mediocrities running the show in Germany, France, Italy and the rest. Merkle, Sarko and BungaBunga. Muddle through we must and muddle through we will. We should learn from the British how to do it. How about writing an article about the the US$ and Pound Sterling, the two leper currencies of the world for a change. Shame on you Spiegel for spreading the bile of the Wall Street and Canary Wharf bankster lobbies.
Show all comments
Page 1

All Rights Reserved
Reproduction only allowed with permission

Die Homepage wurde aktualisiert. Jetzt aufrufen.
Hinweis nicht mehr anzeigen.