Euro 2.0
The Eurozone is drifting farther apart. But are we willing to accept that some countries might be forced to return to their national currencies?
In a recent interview with the German television station ARD, Chancellor Angela Merkel declared that “what Europe needs is more Europe, not less.” This made many non-German observers happy: Italians, Greeks, Spanish, Portuguese, and lately also French people hope that Berlin may be willing to embrace a leadership role on the continent in solving the European crisis.
Yet the chancellor was also acutely aware that domestic reactions to her words were rather different. Leadership normally comes with a nuisance, mostly in the form of sacrifice. Germans pushed for necessary reforms before other European countries did. At a time when they discussed the sexual escapades of prime ministers or officials meddling with economic statistics, Germans reformed their social welfare system under the banner of the so-called “Hartz 4” reforms. The mindset today: If Bavaria prospers, it is because they have earned it.
Merkel has hinted at this in her interview: She argued that Europe is moving at “two different speeds.” One could guess who’s moving at the top speed (Germany) and who is not (all that is not Germany).
Her remarks also hint at a possible solution that tends to surface at discussions in Brussels from time to time: Let’s split the Eurozone and create two separate currencies, and similar countries would be grouped together. It has been realized that monetary policy cannot be parted from fiscal policy. All the discussions about “discipline” are not exclusive to the Euro, it is a central aspect of fiscal policy. Structuring two monetary zones of similar characteristics may help shape environments were policies may exert similar effects.