Let’s not delude ourselves: if the euro falls apart, so will the European Union (the world’s largest economy), triggering a global economic crisis on a scale that most people alive today have never experienced. Europe is on the edge of an abyss, and will surely tumble into it unless Germany – and France – alters course.
France will have to say yes to a political union: a common government with common parliamentary control for the eurozone. The eurozone’s national governments already are acting in unison as a de facto government to address the crisis. What is becoming increasingly true in practice should be carried forward and formalized.
Germany, for its part, will have to opt for a fiscal union. Ultimately, that means guaranteeing the eurozone’s survival with Germany’s economic might and assets: unlimited acquisition of the crisis countries’ government bonds by the European Central Bank, Europeanization of national debts via Eurobonds, and growth programs to avoid a eurozone depression and boost recovery.
One can easily imagine the ranting in Germany about this kind of program: still more debt! Loss of control over our assets! Inflation! It just doesn’t work!
But it does work: Germany’s export-led growth is based on just such programs in the emerging countries and the US.
If China and America had not pumped partly debt-financed money into their economies beginning in 2009, the German economy would have taken a serious hit.
Germans must now ask themselves whether they, who have profited the most from European integration, are willing to pay the price for it or would prefer to let it fail.
Beyond political and fiscal unification and short-term growth policies, Europeans urgently need structural reforms aimed at restoring Europe’s competitiveness. Each of these pillars is needed if Europe is to overcome its existential crisis.