Because of these fears, the euro project was rushed through without key agreement on the common political institutions that would have turned Europe into a truly unified economic zone. As a result, each country follows its own economic policy; Greece spends, while Germany saves.
Harvard economist Martin Feldstein in 1997 argued that the introduction of the euro would lead to major friction within the European Union, because the problems in maintaining a common currency among so many countries would create confrontations and a rebirth of nationalism. Feldstein was right. The current euro crisis has frayed nerves so much that Europeans have become more aggressive and even nationalistic again.
The other fear in 1990 was that, without the euro, a reunified Germany would again dominate the continent. (But)The Germans reformed their economy. Today, instead of being controlled by the French, they are acting independently as they call the shots in an E.U. of 500 million people.
The Frogs planned to control Germany within the EU, but Germany controls the markets.
Without the euro, Germany would still be Europe's most powerful country, but it would not have the multiplier of a common currency. Being able to borrow at low German rates helped create real estate bubbles in Spain and Ireland and sent the Greeks and Portuguese on a spending spree.
It is Germany that has profited most from the profligacy of other Europeans, who take 75 percent of its exports. Even if Greece goes bankrupt, those Mercedes and BMWs were bought with cash borrowed from German banks. So without the euro, there would probably have been less conspicuous consumption, and Germany might not have become the powerhouse it is today.
But there could have been another important consequence. Europe might not have contributed as significantly to the 2008 financial crisis. European banks wanted to find higher returns for the profits they were making by lending all that money to Greece and their other southern neighbors. So what did they do? They bought hundreds of billions of dollars worth of subprime mortgages and went through a real crisis in 2007 and 2008.
European banks are now foundering again as their exposure to the government debt of countries such as Greece threatens further big losses. That is partly why central banks in Europe and the United States promised this month to pump more dollars into European banks to help them pay their debts.
And that's the reason Treasury Secretary Timothy Geithner went to Poland to try to jawbone the Europeans into actually doing something about their problems. The One We Have Been Waiting For dispatches his minion to the rescue!
He invited himself to one of the many crisis meetings of European finance ministers, who are looking desperately for ways to calm things down. But Geithner severely misjudged the mood. He was sent packing, with instructions to clean up his own act before giving Europeans unwanted advice.
Geithner's mistake was to think that the ministers were talking about banking or deficits -- or about money at all. They were really still talking about the war and the fears that motivated Kohl and Mitterrand. Geithner didn't understand the secret code. The meeting was not about action but about how best not to do anything drastic.
No wonder they're worried - even Belgium is in danger of splitting up.
This is perhaps the most important implication of the way the euro was set up. Rather than being kept free of politics, as was originally intended, management of the currency has become a political football knocked back and forth by the growing resentments between richer and poorer Europeans. The poorer countries reject the austerity measures necessary to meet German standards. The Germans refuse to take the steps necessary to build a true economic community.
I wonder what those steps would be, and why the evil Krauts won't just be nice and save Europe?
Instead of acting decisively, as Geithner demanded, European governments feel limited by their commitment to "Europe" to taking small steps that will not endanger the balance within the E.U. This overwhelming fear of internal conflict is the real legacy of World War II, one that has burdened the European Union since its birth in 1957. European politicians may not be experts on finance, but they do know their voters. Doing nothing is better than risking hard-won stability.
Would Europe be better off without the euro? Perhaps. Globalization would have still decimated its weaker economies, and even without the easy borrowing in the euro zone, smaller southern members of the E.U. would probably be facing some sort of economic crisis. But if the euro hadn't been implemented as a political project in a Europe not ready for a common currency, experts could probably clean up such a situation fairly fast. But now, they can't. Because in the end, such decisions are still about the war.