UNHAPPY UNION

Many evenhanded economics tomes are too polite to say it, so leave it to the always opinionated British “paper”—newsmagazine, that is—the Economist to underscore the fact that the euro is a result of a big question that occupied the Allied Powers in the late 1940s: “How to tame the German problem that had led to two world wars?”

The answer was to bind Germany to France economically, forever making it unwise for the two to go to war. Couple that with Winston Churchill’s dream of a United States of Europe, and you have the European Union, a decidedly unequal set of partnerships of rich and poor nations. Note correspondents Peet and La Guardia, who are old euro hands, it is tempting to think, after only 15 years of implementation, that the unified currency is a failure, in part due to the fact that it has clearly led to the ability of rich countries to amass surpluses and poor ones, deficits that further the imbalance. National currencies might have required central bankers to be more proactive, imposing such controls as high interest rates and devaluation. Interestingly, by the authors’ account, the chief problem would seem to be not Greece or Spain but Italy, “the perpetual underperformer in the EU,” which, though comparatively well off, lacks the political will to reform its economy: “[T]he fear of moral hazard was acute, in part because nobody trusted Italian politicians to reform.” So cultural and economic differences taken into account, is there any hope for the euro? The authors suggest ways to make it work and hold out hope for its survival, writing that even though the “political momentum is towards fragmentation, not integration,” nations such as Ukraine still clamor for membership.

For students of geopolitics and international economics, the case studies and implications are worth the price of admission.