Europe’s Next Nightmare

The economic ramifications of a full-blown Greek default are terrifying, but the political consequences could be far worse. A chaotic eurozone breakup would destabilize not only the highly-indebted European periphery, but also core countries like France and Germany.

CAMBRIDGE – As if the economic ramifications of a full-blown Greek default were not terrifying enough, the political consequences could be far worse. A chaotic eurozone breakup would cause irreparable damage to the European integration project, the central pillar of Europe’s political stability since World War II. It would destabilize not only the highly-indebted European periphery, but also core countries like France and Germany, which have been the architects of that project.

The nightmare scenario would also be a 1930’s-style victory for political extremism. Fascism, Nazism, and communism were children of a backlash against globalization that had been building since the end of the nineteenth century, feeding on the anxieties of groups that felt disenfranchised and threatened by expanding market forces and cosmopolitan elites.

Free trade and the gold standard had required downplaying domestic priorities such as social reform, nation-building, and cultural reassertion. Economic crisis and the failure of international cooperation undermined not only globalization, but also the elites that upheld the existing order.

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