Will Vladimir Putin Bolster the Eurozone?

PARIS – Jacek Rostowski, Poland’s finance minister until last November, recently suggested that Russian President Vladimir Putin would not have dared to annex Crimea if he had not observed Europe agonizing over a solution to the euro crisis. Is Rostowski right?

At first sight, such a connection seems far-fetched. Putin’s show of strength involved military force and the implicit threat of a gas embargo, not monetary power (which he does not have). Throughout the conflict over Crimea, the focus has been on Ukraine’s relationship with the European Union, not with the eurozone. Moreover, Ukraine’s recent monetary history has been defined by an exchange-rate peg to the US dollar, not the euro. So how could the euro be relevant to Russia’s annexation of Crimea?

Rostowski’s point is that European countries demonstrated throughout the euro crisis that they had very little appetite for solidarity, even with their partners in the monetary union. How much solidarity would they be willing to display vis-à-vis a non-European Union country? Russia, the reasoning goes, interpreted the EU’s hesitant management of the turmoil as a license to act. And it could go further for the same reason.

Clearly, the series of events following the financial meltdown in 2008 can be viewed as a crisis of solidarity. When a common response to Europe’s banking debacle was needed, the answer was that each country should take care of its own financial institutions. When Greece lost access to financial markets, several months were needed to engineer a response, which took great care not to rely on EU funds and to limit each country’s financial commitment. Indeed, when a “firewall” was finally created, its size was strictly limited and no form of joint liability was permitted. And Eurobonds were quickly rejected, because they would have created open-ended mutualized-debt obligations.