VIENNA – In 2011, Europe’s financial and banking crisis escalated into a sovereign-debt crisis. A problem that began in Greece ended up raising doubts about the very viability of the euro – and even of the European Union itself. A year later, those fundamental doubts remain undiminished.
But, if one compares the EU with the United States or Japan (where public debt equals 200% of GDP), the Union’s current poor image is unjustified. Indeed, employment in the EU as a whole remains high, as do private savings rates. Moreover, the Union’s trade is in balance with the rest of the world.
One reason for doubt about the euro and the EU is that, since the spring of 2010, Europe’s leaders have rushed from one crisis summit to the next, each time devising supposed solutions that provided too little and arrived too late. Europe’s leaders have never fully deployed their economic and political firepower. On the contrary, rather than taming the financial markets, as they once intended, Europe’s leaders continue to be besieged by them.
It should come as no surprise that, with national governments’ parochialism impeding joint EU action, financial markets are using what the communists used to call “salami tactics” to slice away at the Union by attacking its member countries one by one. Indeed, the European Parliament and the European Commission have been sidelined, while a new management model for Europe has emerged: Germany makes the decisions, France gives the press conferences, and the rest nod in agreement (except the British, who have chosen isolationism once again).