CAMBRIDGE – In the first half of the last century, Europe tore itself apart in two wars and destroyed its central role in world politics. In the second half of the century, farsighted leaders looked beyond revenge and gradually constructed the institutions of European integration. The thought of France and Germany fighting each other again seems impossible, and the development of the European Union has greatly enhanced Europe’s attractiveness and soft power in the world. Unfortunately, that historic achievement is now being called into question.
In May 2010, financial markets lost confidence in the ability of Greece to manage its budget deficit and to repay its debt. Fears of default began to affect other countries, such as Portugal and Spain, among the 16 members of the eurozone. In response, European governments, the European Central Bank, and the International Monetary Fund arranged a €700 billion emergency eurozone rescue program to calm the financial storms.
While that intervention provided a temporary respite, uncertainty persists in financial markets. Last month, German Chancellor Angela Merkel declared that, if the euro fails, “then not only the currency fails….Europe will fail, and with it the idea of European unity.”
European unity already faces significant constraints. Fiscal integration is limited. National identities remain stronger than a common European identity, despite six decades of integration, and national interests, while subdued in comparison to the past, still matter.