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Is the euro history?

16 November 2011 By Edward Hadas

“The Owl of Minerva takes flight only as the dusk begins to fall.” Or, to speak more directly than G.W.F. Hegel, we can only become wise about the direction of history late in the day. The aphorism is pertinent to the euro crisis. Is this the twilight hour for the single currency or are the clouds over the euro no more than an early morning mist in pan-European history? The euro’s fate will look inevitable in retrospect (that is Hegel’s point), but for now the balance of historical forces is far from clear.

The technicalities of the euro crisis are bewildering, even to financial professionals. There are rescue funds constructed with baroque techniques of financial engineering, arcane details of labour market reforms and political feuds that have festered for decades. But something much bigger is at stake – whether or not there should be, in the words of Angela Merkel, “more Europe”. If so, the crisis can be resolved relatively simply: lenders would accept the losses caused by their past mistakes and errant governments would promise to play by the fiscal rules henceforth.

But should there be more Europe? Most British politicians think not and most mainstream continental politicians are in favour, if only warily. The reasons on both sides are fundamentally Hegelian. It is a question of which historical forces should prevail.

The anti-euro case is based on one of the strongest forces of the last few centuries – nationalism. The sentiment is sometimes expressed in economic terms, as when the previous British government rejected membership of the monetary union. A multinational currency always goes directly against the nationalist flow, even where the economic case for it is strong. In order for the euro to succeed, Germans must abandon hopes of duplicating their super-strong national currency and Greeks and Italians must either abandon longstanding traditions of loose fiscal behaviour or learn to tolerate interference from EU authorities.

On the pro-euro side, two grand historical forces have provided most of the support for both the European Union and its currency. Both are faltering.

The first is a peculiarly modern force, the fear of war (Hegel thought war was a major spur of historical progress). While Europeans still dread another conflagration, nearly seven decades of peace, including the non-violent fall of the Communist bloc, have been enough to render the threat of war largely theoretical, and irrelevant to the European monetary system.

The second force is the desire for ever greater prosperity. This force, which has come into prominence during the last two centuries, influenced the European leaders who wanted to bring Europe together after World War Two. They thought the economy was the most promising domain for cooperation, and they were right. European politicians and voters alike have proved willing to sacrifice national traditions and rivalries for the sake of European prosperity. The EU now has free trade, standardised regulation and almost unconstrained mobility across borders. The single currency was supposed to be the culmination of economic integration.

The bitterness surrounding the euro crisis shows that the lure of prosperity is now, at best, barely enough to inspire European governments to change their ways. While most politicians still believe that the euro will eventually bring their nations more wealth and economic stability, they and their voters are seriously in doubt whether those goods are worth more than national self-determination.

Philosophers of history might speculate that the desire for prosperity is a waning force today because it no longer has the same power to inspire the comfortable citizens of the EU as it once inspired the impoverished men and women scraping a living amidst the rubble of post-war Europe. Whatever the reason, the euro will not survive the next crisis (even if it scrapes though this one) unless European leaders make a stronger effort to identify their project with historical forces more politically compelling than ever more material gain.

The stakes are high. If the member nations retreat on the euro, further disintegration is likely. That owl of wisdom will probably look down on the movement towards European unity as no more than a wrong turn on history’s path.

But the euro and indeed the entire European project could draw on stronger forces. You don’t have to be a Hegelian to see that Europe as a whole, rather than individual jurisdictions, has been shaped and guided by such great ideas as Christianity and the philosophies of Greece and the Enlightenment. More recently, the entire region has striven to realise the dreams of democracy, honest government, economic security and educational opportunity.

Supporters of the euro and of “more Europe” might look to the French revolutionary call for liberty, equality and fraternity. These are ideals which erase neither national borders nor local customs, and so they can co-exist peacefully, if somewhat delicately, with nationalism. But the euro does indeed have the power to enhance the liberty that comes with effective economic management: the equality of citizens protected by fiscally sound governments and the fraternity that binds the strong and weak.


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