The Crises of Summer

PRINCETON – Europe’s crisis is now poised at the moment that divides recovery and renewal from decline and death. Whereas a few weeks ago, commentators and financial analysts argued that only a few months remained to rescue Europe, leading politicians, lurching from summit to summit, have recently talked in terms of days.

Summer crises are a familiar feature of European history – and of financial history. Indeed, the twentieth century was shaped by three summer crises, whose seriousness was heightened in each case by the absence of major policymakers, who were on vacation.

In two years, Europeans will commemorate the centennial of the assassination of Archduke Franz Ferdinand on June 28, 1914, and the subsequent “July crisis” that triggered World War I that August. On July 13, 1931, the German banking system collapsed, ensuring that what was previously an American economic downturn became the worldwide Great Depression. On August 15, 1971, President Richard M. Nixon ended the United States’ commitment to a fixed gold price, leading to a decade of global currency instability.

Each of these crises involved a highly technical issue, but also a much broader set of political problems. And, in each case, the intertwining of the technical and the political produced disaster.