Felix Salmon

On Monday, I looked at Germany’s attitude to Greece from a nationalist/tactical perspective, and promptly got slapped down by dsquared: “Congratulations,” he wrote, “you’ve proved the impossibility of not only the 2004 and 2007 accessions, but also of the Common Agricultural Policy.”

But the fact is that the Europe which grew in 2004 and 2007, and the Europe which came together to create the CAP, now looks as though it is falling apart. Philip Stephens has an essay in today’s FT which diagnoses this well, and which captures the sudden shift that we’ve seen of late, from the “reassuringly ineluctable” EU of a couple of years ago to something much more precarious today:

Europe no longer carries the stamp of inevitability. Quite suddenly, it has become almost as easy to foresee a future in which the Union fractures…

Germany relishes instead the chance to become a “normal” country, separating what it sees as its national from the European interest. Helmut Kohl’s historical insights are forgotten in the insistence that German taxpayers should not be asked to remain the continent’s paymaster. So too are Berlin’s long-term interests in European-wide political stability and in open markets for its exports.

France struggles with the dynamics of a Union in which more Europe no longer necessarily means more France. Nicolas Sarkozy’s admirable energy is unconnected to strategic purpose. Britain, as ever, stands half on the sidelines. Italy, led by Silvio Berlusconi, has removed itself from influence.

There have been moments of stasis before. But the rules have changed. The fall of the Berlin Wall and the collapse of communism have turned an enterprise of necessity into one of choice. If the Union falls into disrepair everyone will still be the loser; but the threat no longer seems an existential one…

The response of Europe’s politicians has been to sacrifice the strategic to the tactical.

Stephens diagnoses this as a failure of leadership, and narrowly he’s right; certainly it’s impossible to imagine today’s European heads of state making the collective decision to adopt the euro.

But Paul Krugman takes the opposite tack: the failure of leadership, he says, was encapsulated in the decision to adopt the euro in the first place.

The deficit hawks are already trying to appropriate the European crisis, presenting it as an object lesson in the evils of government red ink. What the crisis really demonstrates, however, is the dangers of putting yourself in a policy straitjacket. When they joined the euro, the governments of Greece, Portugal and Spain denied themselves the ability to do some bad things, like printing too much money; but they also denied themselves the ability to respond flexibly to events.

And when crisis strikes, governments need to be able to act. That’s what the architects of the euro forgot — and the rest of us need to remember.

I’m probably closer to Stephens than to Krugman on this one, but it’s true that the architects of the euro assumed that it would foster political unity, in much the same way as some couples think that having a baby will help to save their marriage. Certainly the stakes were raised, but if Germany and Greece never really got on very well in the first place, it was with hindsight far too optimistic to assume that joining together in monetary matrimony would suddenly make them sovereign soul-mates. When they were just cohabiting in the EU, their differences were manageable. But now they’ve had the euro together, that’s not true any more.