The utopian dream of a United States of Europe is coming apart at the seams. Greece, Italy, Portugal and Spain are all on the verge of default, which would push the rest of the common market into the abyss. For once, Paris is refusing to surrender and continues to fight the inevitable downgrade of France’s credit rating. The European Central Bank isn’t strong enough to do much to prevent a continental banking meltdown. Overall, European economic chaos makes U.S. fiscal indiscipline look manageable. This is slim comfort, however, because in the modern global economy, we all sink or swim together.
There is growing interest in numerous capitals to pull out of the eurozone before all of Europe goes down with the ship. The anxiety is especially acute in the richer northern countries. Hans-Olaf Henkel, former president of the Federation of German Industries and an early prominent backer of a unified European currency, wrote a shocking article for the Aug. 29 Financial Times arguing that Austria, Holland, Germany and Finland need to break away from the euro and start a new currency, what some are derisively calling the “kraut mark.” “A lower valued euro would improve the competitiveness of the remaining countries and stimulate their growth,” the German business leader explained. “Exports out of the northern countries would be affected but they would have lower inflation.” In other words, united they fall, divided they stand.
A majority of Germans support bringing back the Deutsche Mark, which was created amidst post-war devastation in 1948, provided stability during reunification in the 1990s, and stayed in place until the nation moved to the euro in 2002. The past decade has been rocky as financial troubles across the eurozone have weighed down the otherwise robust German economy, leading to the popular push for Germans having their own money again. There is still a lingering sentiment among some neighbors that two wars were fought last century to prevent German domination of the continent, but contemporary reality is that just about the only thing keeping the 27-member European Union together are Berlin’s deep pockets. Teutonic phobia likely would prevent a new currency from actually being called the Deutsche Mark but everybody would know that’s what it is.
Chancellor Angela Merkel has been talking a good game about her country’s commitment to the euro, but the writing seems to be on the wall in Berlin. Germany is the the fifth-biggest economy and second-largest exporter in the world, but the eurozone is only as strong as its weakest link - and too many major EU economies are teetering on the brink. German taxpayers are fed up with having to constantly bail out suicidal spendthrift policies in irresponsible countries. They understand that bailouts are only temporary band-aids because welfare states will keep coming back with hats in hand for more cash injections but never improve their failing practices.
Germany’s economy has shown incredible resilience in absorbing the devastated former East Germany after the collapse of communism and carrying most of Europe on its back afterward. The French are freaking out about the prospect of Berlin dumping the euro because that means they’ll be stuck with all the loser economies in the south. But at a certain point, a nation and a people need to do what it takes to protect their own interests, which is what Germans are trying to do. Creating a new Mark-based monetary union with fellow northern economies that maintain strict fiscal controls could help salvage something when the next economic tsunami hits Europe.
Brett M. Decker is editorial page editor of The Washington Times. He is coauthor of the new book “Bowing to Beijing” (Regnery, 2011).