Taken on its own, the border squabble in Guben is a seemingly minor concern, but it comes as the twin forces of economic stagnation and surging nationalism threaten to tear Europe apart. Even as European leaders struggle to halt the spread of the debt crisis—a task that they increasingly appear unable to handle—a wider backlash against European integration poses an existential crisis for the continent. Europe is failing, both economically and politically, leading to the question: can it be saved, or is Europe destined for the embalming slab in Guben?
The most immediate threat to Europe is the infectious debt crisis, which some argue will inevitably lead to the collapse of the euro currency zone. After decades of unsparing social programs, not to mention bank bailouts and stimulus measures, many European nations are saddled with massive debt loads and deep deficits.
The European Central Bank is fighting back by aggressively buying up the debt of struggling countries in a bid to suppress rising interest rates. At best that’s a stopgap measure, though. Nor is a bailout for Italy on the table. The total cost to rescue Italy and Spain has been pegged at $1.4 trillion. And so governments have been forced to take a slash-and-burn approach to their budgets. At an emergency cabinet meeting in Italy on Aug. 12, the government agreed to a US$65-billion plan to eradicate the country’s deficit by 2013. “Our hearts are bleeding,” said Prime Minister Silvio Berlusconi.
Often when countries are faced with hopeless insolvency, they devalue their currencies to make their exports more attractive. Since the PIIGS are tethered to the euro, that option isn’t available. Cardiff University economist Patrick Minford argues that most of the countries in Southern Europe are likely to default whether they stick with the euro or not, so they’re better off controlling their own currencies.
