Monday, June 18, 2012

Europe's Struggle

The Lehmann Letter (SM)
It appears that Greek voters have chosen to remain in the euro zone.

But that does not mean that Europe's struggle has ended.

There are alternative visions on how to go forward. Some say austerity: Balanced budgets - with their spending cuts and tax increases - so that debtor nations can repay their bills. Others say stimulus: Temporary deficits - with their spending increases and tax reductions - so that debtor economies can grow sufficiently to repay their bills.

There are also longer-term concerns. Germany wants to be sure that everybody understands that all nations must be prepared to meet their own obligations. This means a closer and more integrated fiscal and monetary union - with strong, centralized political control - to avoid a repeat of the current crisis.

Then there is Germany's overriding goal, which is also France's, Italy's and most of the other European nations’ overriding goal, to fashion a United States of Europe. This is Europe's grand project, its single most important objective. This was the prize that the leading European statesmen sought after World War II, and it continues to be the prize that Europe seeks today.

There has been much struggle on the way; there is struggle today and there will be much struggle in the future. But the optimists believe when today's issues are successfully resolved, Europe will emerge stronger and continue its march forward towards full integration.

See, for instance, the article in yesterday's New York Times. Europe's planners were taking no chances in the event that the Greek election had a different outcome:

“European Leaders to Present Plan to Quell the Crisis Quickly”

The article's opening paragraphs said:

“The head of the European Central Bank and other euro zone leaders worked on Saturday on a grand vision for the euro zone meant to reassure investors and allies that flaws in the currency union will be addressed quickly.

“The plan will include measures to prevent bank runs and reduce what has become a vicious cycle of government debt problems turning into banking crises, as has happened in the past two years. In addition, the plan will push for countries to remove the regulations and layers of bureaucracy that inhibit competition, keep young people out of the work force or make it difficult to start a new business.

“The goal would be to make the euro zone less vulnerable to crises and better able to grow its way out of the current debt crisis. But it is unclear whether yet more pledges of reform, which would face significant hurdles, will calm financial markets.”

The skeptics will remark: Easy to say but difficult to accomplish. True. Thus far, however, history appears to be on Europe's side.

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© 2012 Michael B. Lehmann

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