So Europe muddles along with subpar growth, cheating on integration, and the hope that the nasty fringe political parties can’t feed too much on the democracy deficit.
Via Meadia – Europe Is Burning, Slowly
Many economists looked at the deep design flaws of the euro, for example, and predicted that this unwieldy currency would never get off the ground. Those skeptics were right that the euro wouldn’t work well, but they underestimated the depth of the commitment to putting the euro in place, disaster or not.
These days, the euro is held up partly by sheer political will, but partly also by the sober realization that the pain of dismantling the currency would be intense under the best of circumstances and that the political and economic issues involved would make it impossible to get out of the euro adroitly. Europe is a very wealthy continent and if it wants a common currency it has the wherewithal to pay for one for a long time to come.
I can imagine a future in which the EU resumes a steady progress toward an “ever closer union,” but it seems more likely at this point that we can expect it to look more and more like the Holy Roman Empire in its prime: a complicated assemblage of many different kinds of states, with a weak executive and legislature, a somewhat stronger judiciary, and a great many offices and authorities that work in their own way and time.
If things work out along these lines, I would expect the euro to muddle along, but perhaps with many forms of parallel money operating in the nooks and crannies of the system. Ingenious workarounds would mitigate the strict official rules as smart lawyers and accountants worked through the treaties in search of loopholes. The currency union would be like an unhappy Italian marriage in the old days: no divorce or official breakup, but mistresses on the side. This would be an expensive and messy system, and it might well permanently slow Europe’s growth, but a flawed currency union could limp along for a long time.