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SANDERS: The euro is dead! Long live the euro!

- - Sunday, October 30, 2011

In the spring of 1947, I was on deck as one of that dying breed of trans-Atlantic liners was tugged into Le Havre. Despite decades of experience, there was incredible confusion as French stevedores hassled over tying up the ropes. A rail companion, a French Jewish wartime refugee returning from America, declaimed, "Eh voila! L'elan francaise." My 90 hours of Berlitz preparation for being a "sois-disant" Paris student, unabashedly imitating my '20s predecessors, had done me well. But I hadn't a clue what "elan" meant, so he went into a "Cartesien" dissertation on how Frenchmen were individuals as none other, cooperation comes hard if at all, and the genius of the civilization resides in that peculiarity. (Charles de Gaulle: How can anyone govern a nation that has 246 different kinds of cheese?)

As "Europe" falls apart, it's natural that each of its 27 members would be doing their own thing. For the moment - while a search goes on for a missing $1.4 trillion in euros - the euro has been rescued as a common currency for 17 European Union members and, hopefully, the whole Europe Project to unite a continent for peace and progress survives.

But the continuing crisis, whatever its final outcome, is already rearranging geopolitical pieces on the European chessboard:

London smugly congratulates itself for refusing to enter what is now a failing common currency, preserving the city's worldwide financial role. But Prime Minister David Cameron's backbenchers called for a referendum on British EU membership. While the rebels were put down, they will haunt his promised negotiations to rearrange Britain's relationship with Brussels.

German Chancellor Angela Merkel will fiercely resist efforts to rearrange London's other "special relationship," perhaps forcing a showdown on the question of whether you can be half in and half out. She has rammed through a call for more EU economic and political integration, swapping it for her recalcitrant Bundestag's veto over more bailout funds. But at her back are obstinate voters reluctant to pick up the chips for the bankrupt southern members of the bloc's common market, a market that Germany's export drive exploited so shamelessly.

Mrs. Merkel bested French President Nicolas Sarkozy, who faces a tough election next year after failing to produce his promised market-oriented reform of the French economy. He wanted a monetary easing by the European Central Bank to save the euro and inflate. In that grandiose French style, he proposed a "comprehensive" settlement while the methodical Teutons wanted to move step by step - even at the risk of more mini-crises and general economic doldrums as austerity slams the brakes on growth.

Italy's tragicomedy starring Prime Minister Silvio Berlusconi featured parliamentary fisticuffs. Worse, his promised painful belt-tightening for the Italian welfare state, built up steadily since it beat off a nearly successful communist coup d'etat in 1948, could get its ultimate test. Does the family, the cornerstone of Italian culture since the Romans, remain strong enough to buoy a society with the lowest birthrate in Europe, a society now facing invading immigrant hordes from the North African coastal periphery?

Initial market reaction was heartening. News that America, still the heart of the world economy for all the talk of shifting global patterns, had grown in the past quarter instead of drooping into a double-dip recession reassured the optimists.

But there is bound to be a second look. And when the spectacles come out, analysts will find less detail to the euro settlement beyond the headlines. Germany is keeping a staying hand on the throttle of the European Central Bank. The European Economic Stability Fund still looks more like an impoverished debt set-aside plan than a miniature International Monetary Fund. And the controversial eurobonds proposal hangs over the dusty debris left by the leaders' talkathons.

Mr. Sarkozy's call to Chinese Prime Minister Wen Jiabao for help in bailing out and recapitalizing European banks is a fantasy. Beijing plays a completely mercantilist hand. With its exports threatened and repeated promises to its own restless population to shift to a more consumer-oriented economy, China's more than $3 trillion in monetary reserves (20 percent in euros) are mortgaged to a deflating dollar and to China's own incipient inflation. Nor is help likely to come from Brazil, caught in a welter of official corruption scandals, or India, with seemingly uncontrolled inflation. President Obama's op-ed last week proposing a firewall against the European debacle added insult to injury. U.S. banks stopped euro lending sometime back - with their exposure still unknown.

Help, if it comes, thus will have to look to those glorious European traditions - all of them, as varied and contradictory as they are.

Sol Sanders, a veteran international correspondent, writes weekly on the intersection of politics, business and economics. He can be reached at solsanders@cox.net and blogs at http://www.yeoldecrabb.wordpress.com.