The best sentences I read today:
Yet as the earlier Ireland-Nevada comparison shows, the United States works as a currency union in large part precisely because it is also a transfer union, in which states that haven’t gone bust support those that have. And it’s hard to see how the euro can work unless Europe finds a way to accomplish something similar.
That is from Paul Krugman’s essay in this weekend’s NYT magazine, “Can Europe be Saved?”
Krugman’s argument is that while the blame for the economic crisis of the past three years has been largely pinned on Wall Street, the European Union is at least as much at fault. For me, the key parts of his story are the comparisons between Iceland and Brooklyn, or Ireland and Nevada, explaining why the economic crisis has hit these places differently, and how currency zones affect the policies various regions are able to implement in order to cope.
Europe’s problem, crudely put, is that it is half-assed. For half a century, its elites have imagined that it could build a federal state by incremenents, adding one piece of the puzzle every decade or so until everyone would eventually wake up and realize they lived in a country called Europe. But as Krugman points out, a lot of people argued that the currency union, in the absence of proper federal oversight, would lead to precisely the sort of crisis we’re seeing now.
Krugman ends his essay by listing four ways Europe might emerge from the crisis. Two involve muddling on through, one foresees the dissolution of the Eurozone (or at least the exit of some participants). The last possibility would see Europe become properly federalized — hence the passages I quoted above. Krugman seems to think that muddling through won’t work, and that Europe has a choice to make — the backwards step of a failed Euro, or the positive step of deeper political integration. I don’t see anything close to the political will necessary to push Europe toward a proper constitution.
PS Larry Sidentop’s Democracy in Europe remains the best book I’ve read on the subject. IMO it’s a must-read for students of comparative constitutionalism.