This post seeks to articulate a few conclusions in regard to the 4-month extension of a bailout package from the Eurogroup to Greece in the aftermath of Syriza's electoral victory in late January. As a preliminary summation of the argument here, I consider it unlikely that the Greek government will successfully achieve austerity-oriented reform measures demanded by major financiers of sovereign Greek debt, most notably Germany, within the four-month window offered by the Eurogroup finance ministers. Rather, it may be far more productive for Syriza to utilize the next four months to undertake necessary measures in order to effect a transition back to an independent national currency (e.g. enact short term capital controls to prevent leakages from the financial system of a scale that would render major banks insolvent from the moment Greece exits the Euro). Beyond this (and beyond the limited bounds of contemporary rationality within the Euro-zone), it might be worthwhile for Greece and certain of the weaker peripheral Euro-zone economies to cooperatively (and clandestinely) contemplate the creation of an alternative monetary union, oriented toward the developmental interests of economies reliant on relatively depreciated monetary valuations in their engagements with the larger global economy. That is to say, it is not necessarily the case that monetary union was an intrinsically bad idea, but, in its conception, the Euro could never succeed in harmonizing the interests of all of the member states contained by the Euro-zone.
1. The set of reforms demanded of the Greek government by the Eurogroup contradict, at least in part, the agenda promised by Syriza in its rise to power. Either Syriza will embrace these reforms half-heartedly and, thus, forgo any hope of a third bailout from Eurogroup/ECB/IMF, or, in its zeal to achieve the demands of the Eurogroup, Syriza will alienate the national electorate that chose its platform on the hope that Syriza would stand up for Greek sovereignty against the oppression of global finance capital.
Interestingly, the Eurogroup conferred the responsibility of defining a set of fiscal reform proposals to the Greek governing coalition (in line with Greek demands for sovereignty). The proposals that were accepted (see "Key Points: Greece Economic Pledges to Europe," BBC (24 February 2015), at: http://www.bbc.com/news/world-europe-31599838) seek to achieve a compromise between the demands of the Eurogroup for restrained governmental expenditures, "flexible" labor markets, and enhanced privatization of transportation and other key logistical infrastructures (e.g. utilities), and the electoral platform of Syriza, oriented toward enhancement of economic justice for lower income populations (e.g. increased taxation of higher income groups, increased minimum wages, subsidization of energy expenditures for lower income groups). Over the next four months, notwithstanding an initial acceptance from the Eurogroup, these measures are not going to fly! The notion of "balancing" a need for fairness against the demand for flexibility in collective bargaining agreements, for example, seems unlikely to achieve the sort of explosion of private entrepreneurial development in Greece sought by the Eurogroup. For that matter, it seems unlikely that under any conceivable regime of labor regulations, crafted with even the slightest intention of protecting workers and promoting a decent standard of living for working people, adequate levels of private sector economic growth in the Greek economy could be achieved to bolster the willingness of German and other financiers to extend further resources to the Greek government to forestall a sovereign debt default. Likewise, increased enforcement of tax collection will drive recalcitrant high income groups to relocate to the nearest available offshore tax haven! No. Four months from now, the Eurogroup will look at Syriza's Greece with disapproving eyes, however hard Syriza works to balance their demands against the demands of Greek citizens! The best laid plans for reform in the Greek economy will come to naught because such demands from abroad are simply not oriented to serve the best interests of Greek citizens, who will remain and will hopefully and forcefully express their sovereignty!
2. The problems of the Greek economy ultimately originate in monetary union with relatively strong national economies such as that of Germany. These problems will only be successfully addressed by separation from the contemporary Euro-zone and restoration of the competitiveness of Greek export sectors by means of monetary devaluation (i.e. the restoration of currency valuations that reflect the relative competitiveness of Greek industry).
Expressing this argument in the simplest possible terms, the value of a currency in international exchange is largely determined by the levels of demand for the currency in transactions by foreign actors. When firms in the U.S. seek to import a good from Mexico, they must pay for it in Mexican pesos. As such, they must use U.S. dollars to purchase pesos on international exchange markets. Such a transaction increases the supply of U.S. dollars in exchange markets and removes Mexican pesos, in the process incrementally lowering the value of the U.S. dollar and raising the value of the Mexican peso. If, across all exchanges in a given period, the U.S. imports a larger value of goods and services from Mexico than it returns as exports, then this pattern of trade will tend to exert downward pressure on the value of the U.S. dollar and upward pressure on the value of the Mexican peso. Subsequently, as the Mexican peso rises in value relative to the U.S. dollar, Mexican exports to the U.S. become relatively more expensive to purchase for U.S. firms and consumers. If the cost of goods imported from Mexico continues to rise in the U.S., domestic American producers of the same goods or close substitutes may steal some of the market share among U.S. consumers away from Mexican imports, in turn, lowering the demand for Mexican pesos by importers and stabilizing the exchange rate between the U.S. dollar and Mexican peso. In this manner, in the current era of economic globalization, fluctuations in the nominal exchange rate (i.e. the international exchange market price for a currency in terms of another currency) for national currencies can be an important regulator on economic development at the level of individual national economies.
Before European monetary integration, the Greek economy was poorly integrated with other European economies. It relied largely on domestic production of consumption and investment goods. To the extent that it exported goods and services to other European economies, the goods were largely composed of low-cost, labor-intensive goods, in addition to significant European consumption of labor-intensive Greek service exports in the travel and tourism industry. The relative isolation of the Greek domestic economy from dependence on imported consumption goods contributed to keeping labor costs relatively low, enabling Greece to compete with numerous other national economies producing comparable low-skilled, labor-intensive goods. The high degree of competition in the markets in which Greek exporters competed, moreover, kept the nominal exchange rate for Greece's national currency, the drachma, relatively low, ensuring that domestic producers of consumption and investment goods might remain somewhat sheltered from import competition by the country's weak ability to afford larger quantities of imports. In short, the relative weakness of the drachma enabled Greece to occupy a particular, highly competitive market niche at the southeastern corner of Europe.
When Greece joined the Euro-zone in 2002, it traded a relatively weak currency for a comparatively strong currency. Monetary unification with the economies of Germany, France, the Netherlands, and other economies with relatively strong pre-Euro currencies and strong international demand for relatively high-skilled, capital-intensive goods and services meant that Greece would immediately encounter a significant appreciation in the purchasing power of its currency in international trade. Such an appreciation in the nominal exchange rate for Greece both made imported goods and services relatively cheaper for Greek firms and consumers and made traditional Greek exports more expensive. Insofar as the latter markets were already strongly competitive, the union-induced monetary appreciation for Greece implied that the continued growth of Greek exporters would be hampered. On the other hand, increased international purchasing power implied that firms producing for the domestic economy would be hampered by influxes of imports. As such, the trade balance for Greece, which was already negative in its trade relations with other European economies, displayed an exploding deficit with an increasing range of trade partners - both sides of Greece's trade balance sheet (demand for imports and demand for exports) necessitated the development of a steadily growing deficit.
In view of this pattern, largely shaped by monetary integration and the appreciation of nominal exchange rates for Greece's new currency in relation to the drachma, a predictable counterbalancing pattern emerged - Greek businesses, consumers, and, most notably, the Greek government began accumulating significant quantities of debt from foreign capital markets. In the case of the Greek government, the impact of monetary integration in hindering the growth of the private sector placed restraints on the growth of domestic tax-based finances. Moreover, persistent growing demand for imports not supported by export growth placed inflationary pressures on the larger Greek economy. As consumer prices increased, the government sought to create income supports (e.g. fuel subsidies), especially for low-income populations, financed largely through issuance of debt. Such accumulations of sovereign debt were ultimately unsustainable.
The enduring Greek debt crisis must be viewed, significantly, as a symptom of the failure of monetary integration in the appreciation of nominal exchange rates in peripheral European economies not otherwise linked to the macroeconomic "fundamentals" for these economies. The diminished growth of low-skilled, labor intensive export industries in Greece should have induced a reconfiguration of Greek trading patterns and, hence, the development of new, high-skilled, more capital intensive export industries, catering to new, non-Euro-zone trade partners. In some respect, such a transition appeared to be occurring in Greece's trade patterns from 2002 to 2008, but it did not occur quickly enough. Rather, domestic consumption spending grew much more rapidly than investment in fixed capital for new export industries. Moreover, if Greece is beginning to reorient its trade toward non-Euro-zone economies, the slow growth of export industries directed to these economies has opened up a generalized and strongly unfavorable balance of trade outside of the Euro-zone where one did not exist prior to monetary integration.
With these considerations in mind, the best possible course for Greece to follow, with respect to its trade relations to the larger global economy, would, first of all, involve exiting from the Euro-zone and reintroducing a devaluated national currency. If nothing else, such a move would force Greek businesses and consumers to restrain their demand for imports and, as such, enable firms in traditional Greek export markets and newcomer industries to progressively close the gaps in Greece's current balance of trade. While this might represent a long and painful process for Greece, it could be infinitely more fruitful for the long term growth of the Greek economy (if the development of fixed capital and logistical infrastructures to support new export sectors could be prioritized) and for the expression of the sovereign democratic will of the Greek people against domination by international capital markets.
3. Austerity, as a policy regime, not only undermines the sovereign democratic interests of subjected national economies (like Greece), but also reflects an irrational preference for the "strip mining" of capital assets in weaker economies at the behest of globally dominant economies and the global financial sector.
I need to differentiate here between particular sets of policy recommendations here that might otherwise be linked to the term "austerity." In this respect, I want to initially offer the insight that Greek household consumers and businesses are entering a period of their country's history in which consumption and investment resources will be more scarce. As such, there is simply no way for the Greek economy to avoid austerity, understood as a broad and sustained negative shift in the production of goods and services and/or purchasing power. Austerity, as a macroeconomic phenomenon, may not be problematic in itself. Rather, the problems concern the sources for such a shift, the distribution of pain (i.e. diminished consumption possibilities) across a national economy, and the means by which an economy can transition back to a positive and sustainable growth path. In the last decade its economic history, Greece experienced a vast penetration of relatively inexpensive imports while the prices of domestically produced goods suffered inflation and became steadily less competitive. This pattern created or otherwise exacerbated the accumulation of debt, both public and private. It was, thus, unsustainable, and Greece needs to move to a more austere and moderate, but still outwardly focused, mode of economic development. The most important concern here, in various ways, involves the distribution of austerity across the Greek population. How can the government enact policies that will ensure that the wealthy bear their own weight in suffering a downsizing of the Greek economy? How can Greece forge a new, more equitable and entrepreneurial economic developmental model that will restore economic growth while more broadly distributing the gains from enhanced productivity and output? These are all valid concerns as Greece goes forward, especially as it leaves the Euro behind. They implicate the notion of economic citizenship, configured as a generalized commitment of every man and woman in Greece to the project of ensuring that every one of their fellow citizens can eat and shelter themselves today and that every child will have a brighter and sustainable (not only in financial but also in ecological terms) economic future.
By contrast, the policy regime that Germany and other strong Euro-zone economies are pressing on Greece as a condition of assistance in avoiding a sovereign debt default and the collapse of its financial system involves a very specific approach addressing Greece's unsustainable accumulation of debt to the exclusion of any concern for the long term welfare of the Greek economy. As opposed to some intentionally enacted effort by the Greek population to scale back domestic consumption and prioritize the development of a financially and ecologically sustainable export-driven economy over the long term, the policy regime that the Eurogroup and the Troika seem intent on imposing on Greece amounts to, on the one hand, a crash diet for the Greek government, taking little account of the social service needs of a larger population currently enduring twenty-five percent or more unemployment, and, on the other hand, a yard sale of publicly held capital assets in order to generate funds that may just scratch the surface on Greek sovereign debt obligations. Moreover, in the face of the pain this brand of "austerity" has imposed and will continue to impose on Greece, at the behest of the Greek government's institutional financiers in the EU, it affords no obvious mechanisms to bring Greece back to a positive, sustainable growth path and does not address the biggest obstacle to Greek fiscal solvency and private sector economic health, inclusion in a monetary union enforcing the repercussions of nominal exchange rates fundamentally misaligned with respect to Greek national economic performance and absent any fiscal redistributive mechanisms to channel the gains from monetary union from the strongest economies to the weakest.
To be clear, the medicine being prescribed by the Eurogroup and the Troika to Greece most directly serves the short term interests of the largest holders of Greek sovereign debt, in private financial institutions and government treasuries throughout the EU. With this in mind, the austerity regime serves to create conditions necessary to recover as much of the government's debt obligations as possible even as the Troika extends bailout funds to prevent an outright default. In effect, the global financial sector, through the agency of the Troika and Eurogroup, is forcing the Greek government to forgo a range of necessary social expenditures in order to prioritize payment of its sovereign debt obligations. Further, by pursuing the privatization of segments of the Greek economy held by the government, the administrators of the bailout are seeking a short term solution to generate revenues through which the government can offset some of the need for outside financing in order to meet debt servicing obligations.
In and of themselves, the sorts of fiscal reform initiatives and privatizations being undertaken as a requisite for bailout funds may not be entirely unreasonable and salutary to the long term restructuring of the Greek economy. To be fair, I am not entirely cognizant of the scale of Greek governmental bureaucracy in relation to those of other EU states. For that matter, measures oriented toward cracking down on corruption in the Greek government's engagement with private sector beneficiaries of state largesse are absolutely imperative if Greece is to emerge with a more efficient and transparent fiscal policy apparatus. Finally, I have previously expressed doubts on this blog about the Greek government's capacity to adequately manage key infrastructures, in transportation and logistics, in order to promote a larger reconfiguration of export industries. Emphatically, I do not know whether the privatization of the Piraeus port complex will have positive or negative implications for long term macroeconomic growth in Greece. Minimally, it will aid the Greek government in meeting its short term obligations for debt servicing, but the capacity of the Syriza government to develop a meaningful long term infrastructure development plan, conducive to the growth of targeted export industries, remains an open question. In this regard, maybe the sale of the Greek's most important port complex to China's Cosco Group or other foreign investors will create conditions through which its facilities can be adequately maintained and upgraded as necessary for some time into the future and without further liabilities to Greek taxpayers.
On the other hand, an aggressive effort to make the privatization of government assets a centerpiece in the generation of fiscal resources to pay debt obligations may impose long term negative consequences for the Greek economy. Increased foreign ownership of capital assets in the Greek economy will entail some degree of long term outflow on generated incomes to parent corporate entities outside of Greece, in turn counterbalancing the realization of short run government revenues through the creation of long term current account liabilities. In more symbolic terms, an extensive privatization effort through foreign investment represents a displacement of the stakes held by Greek citizens in key elements of their own economy. The fact that the Greek government would never have considered parting with its sixty-seven percent stake in the port of Piraeus if it was not being compelled by the Eurogroup to do so is evidence enough that this privatization was enacted without extensive and deliberate consideration by the government on the long term consequences of ceding public control over a key transportation infrastructure. It goes without saying that the German finance ministry, in safeguarding its interests and those of German banks with exposure to Greek debt, isn't extensively considering what privatizations of Greek infrastructure might be undertaken to generate revenues while simultaneously minimizing the long term negative effects on Greek economic growth.
Finally, in patterning its own policy regime to suit the demands of the Eurogroup, the Syriza government has made tangible efforts to redirect some of the pain from austerity toward higher income groups and, in particular, police tax avoidance within such circles. Predictably, these corners of the Greek population have reacted noisely to the notion that they should be forced to pay their fair share in order to set the government on the road toward fiscal solvency. It seems clear that the Eurogroup is indifferent as to how the Greek government can generate the revenues necessary to pay off its debts, but the larger problem here is that the government will be extracting further resources from the economy at a time in which the it has already experienced a significant decline in activity and employment and no meaningful plan seems to have emerged for restoring economic growth short of some nebulous expectation that Greece will eventually begin to attract foreign investors if it reduces labor costs and restores state fiscal solvency.
4. The best resolution for the lingering crisis of the Greek economy would arise from Greek integration in a new, alternative monetary union, embracing the peripheral Euro-zone economies, certain dis-favored regions of core Euro-zone economies, and certain non-European economies.
From a Jacobsean standpoint, the question we most need to ask in regard to international trade and monetary policy concerns how to maximize positive feedback signals to discrete regional economic systems. By this I mean that the currency used by a regional economy must, as accurately as possible, reflect, through nominal exchange rate fluctuations, the demand for goods and services generated as exports from the regional economy. The best way to achieve these ends would be to have unique regional currencies, with floating nominal exchange rates, for every regional economy (i.e. city-regional/metropolitan and rural agrarian/extractive regional economies). This entails the portrait of a global economy with, perhaps, thousands of currencies, exchanged openly with floating exchange rates without any effort to hedge the value of currencies against some metallic base or a reserve currency (e.g. the U.S. dollar). Such a structure poses obvious problems arising from the complexities of a global financial system in which the value of each currency must be continuously expressed in terms of thousands of other currencies - a dream for monetary speculators but a nightmare for investors in real economic processes seeking predictable relations between exchange rates, interest rates, and future commodity values.
Recognizing the problems apparent in constructing systems of regional currencies that would more accurately reflect fluctuations in internal economic activities and demand for exports from discrete regional economies, it is equally apparent that the opposite extreme, consolidation of regional and entire national economies into unified currency zones like that of the Euro, has been a disaster for weaker regional and national economies, desperately in need of positive monetary feedback mechanisms through appreciation and depreciation of nominal exchange rates in direct relation to the macroeconomic "fundamentals" of regional economies. As I have argued previously on this blog and as many, many other economists have argued in regard to the Euro-zone economies, the presence of a monetary union without a complementary fiscal union to redistribute the gains and losses from monetary consolidation implies that the stronger economies will enjoy excess gains in competitiveness for exports from implicit devaluation and the weaker economies will suffer uncompensated losses in competitiveness from induced implicit appreciation. Moreover, it is clear that the political will does not exist and probably never will exist to establish a fiscal union in the Euro-zone that would tax the stronger economies and deliver compensation to the weaker economies to offset the effects of a unified currency.
Appropriately the question is how can weaker national economies, like that of Greece, move away from the particular advantages of an international/interregional super currency toward a currency that will more accurately convey positive monetary feedback with regard to internal economic activity. Beyond the obvious solution of reenacting national currencies, another possible direction might exist in breaking up the single currency zone into two or three interregional super currencies, grouping internal regional and national economies into a unified currency area with other regional and national economies of a similar scale, orientation of economic activity, level of technological development of fixed capital and infrastructure, and structure of financial institutions. If Greece were, thus, to unify with Spain and Portugal, possibly Ireland, and sub-national economies like southern Italy (including Sicily and Sardinia) and southern France (including Corsica), then it would be able to truncate the range of economic forces promoting an appreciation of nominal exchange rates beyond those directly attributable to the health of each single regional economy.
Within such a consolidated currency zone, some variation in the comparative strength of particular national and regional economies would continue to exist, but it would be less stark than the level of variation posed by the unification of these national and regional economies with a national economy like that of Germany. Moreover, it might be at least somewhat easier to discover the political will to develop a regime of fiscal redistributions addressing the gains and losses from consolidation. Likewise, central bank operations and the development of monetary policy within such a monetary zone might be easier to harmonize, against the interests of borrowers and lenders, across a smaller monetary zone. At the same time, acknowledging the hurdles currently faced by the Greek state in obtaining outside financing of governmental expenditures, it might be somewhat easier for governmental jursidictions in such a union to market sovereign debt instruments at less than wholly prohibitive rates of interest.
The great complexities involved in developing such an interregional currency zone below that of the current Euro certainly reside in the notion of carving certain regional economies out of particular national economies that might continue to reside in another currency zone. A unified national currency is both a subject for the exercise of sovereign political will and a culturally unifying symbol. While it might make sense to argue that the regional economy of Naples exists within a distinct network of trade and investment relations from that of Turin and that the comparative sensitivities toward international commodity market fluctuations in Toulouse are vastly different than those experience in the Paris metropolitan economy, it requires a energetic stretch in reasoning, fortified by the confidence that only well reasoned theories can provide, to argue that it would not only be feasible but beneficial to all involved if particular national economies, configured as hodge-podge assemblages of distinct regional economies, were monetarily disaggregated. The complexities involved in such a disaggregation, again, concern the functioning of national states, as sovereign entities with unitary national fiscal processes. If the French and Italian economies were broken to incorporate parts of these economies into a new unified currency zone of the peripheral Euro-zone economies, then these states would have to develop entirely new forms of fiscal policy management to account for the fact that a single political sovereign governs over space in distinct monetary zones, with divergent fiscal accounting and budgetary mechanisms and divergent capacities to finance expenditures through sovereign debt. With regard to the intersections of monetary and fiscal policy, and, for that matter, for the evolution of political questions on the exercise of national sovereignty, the breakup of individual national monetary unities through divergent interregional monetary consolidations would constitute a new tableau for experimentation and, perhaps, a model for other such experiments (e.g. a breakup of the consolidated monetary economy of the U.S.?!!).
Closing, the development of a consolidated monetary zone for the peripheral economies of the Euro-zone seems manifestly unlikely, if only because no one seems to even be considering the possibility that there might be some kind of half-way house between full reincorporation of national currencies and total monetary union from one end of Europe to the other. In its favor, I would continue to assert that the destabilizing effects of a total breakup of the current Euro-zone into a space of national currencies would be minimized to some extent by a partial breakup into new consolidated currencies. If Germany remained in a currency zone with certain other national and regional economies with comparable levels of strength in international trade and finance, it would suffer less of an appreciation in currency valuations than it would if it reverted to a national mark. Greek, Spanish, and Portuguese consumers would suffer less inflation of import prices relative to a return to national currencies if their national economies could unify with others of a similar economic developmental level and export potential. Finally, the addition of certain other disarticulated regions of other national economies might finally give such disarticulated regional economies the sort of boost needed from devaluation to kick start economic development in independence from the dominant metropolitan regional economies inside their national boundaries.
Conversely, it seems almost indisputable that Greece will perform a Grexit from the Euro-zone this year, returning to the drachma and defaulting on its Euro-denominated debts. When Greece leaves, the Euro may experience an appreciation in nominal exchange rates, reflecting the absence of continued liabilities for the remaining national economies to support Greece's servicing of sovereign debt obligations. Such an appreciation would, likely, continue to hinder the capacity of Spain, Portugal, and Ireland to manage their recoveries from the particular circumstances of their debt crises. In general, if the presently diminished value of the Euro remains overvalued in relation to the macroeconomic fundamentals of the peripheral economies, then an appreciation will continue to hurt the competitiveness of their export sectors and invite more accumulations of debt to offset current account deficits. On the other end, nominal exchange rate appreciation would inflict some pain on the German economy, manifest through certain losses in demand for manufactures against firms in China and the U.S. All of these predictions, in turn, assume that a one-time forced write-off of Greek sovereign debt will not create significant crises within the financial sectors of exposed Euro-zone economies, driving investors away from the Euro-zone, causing a larger devaluation of the unified currency, and reinforcing deflationary pressures currently in place. Neither prediction sounds salutary to the economic health and, more importantly, the political stability of Europe.
5. The EU states, including the U.K. (at least until UKIP pushes it out of the EU!), need to pursue a consistent, unified policy regime with regard to the maintenance of peace (e.g. peace in eastern Ukraine!) and the continuation of free trade, even if the Euro disappears into the dust bin of history.
The underlying practical rationale behind the European Monetary Union and, before it, the European Economic Community/trade liberalization is grounded in theoretic conceptions at least as old as Adam Smith's The Wealth of Nations. Emphatically, nation-states, committed to the principles of international free trade for mutual benefit, should be less inclined to configure their conceptions of nationality in ways that prioritize militaristic visions of a national destiny and, thus, reduce international relations to a zero-sum game to be resolved, in the last instance, by armed violence. Over Europe's short history with rigorous trade liberalization and even shorter history with collective monetary policy management, the Western European states have been too preoccupied with the development of favorable economic relations and maintenance of the competitiveness of European firms against industrial sectors in the U.S. and East Asia to re-visit the logic of militaristic nationalism.
In view of recent circumstances, most notably the recent round of European Parliamentary elections, it would seem that this pattern may be changing as the negative effects of monetary integration wear away at the limited sources of trade competitiveness enjoyed by the peripheral EU/Euro-zone economies. Predictably, labor flows within the Euro-zone and from outside of it have demonstrated the willingness of workers and their families to chase the best opportunities to achieve a better life in countries with more robust labor markets and more generous national social expenditures. As the regulation of labor flows have progressed to incorporate greater degrees of liberalization, consequently, the increasingly open states at the upper and middle ranges of the income distribution in the Euro-zone have caught anti-immigrant xenophobia, a phenomenon most apparent in middle range economies like that of France, where the diminishing competitiveness of manufacturing industries has compounded the political effects of increased labor migration. Succinctly, for France, a long history of official acquiescence toward culturally heterogeneous migration from former colonial possessions combined with a persistent failure to adequately integrate racially and ethnically distinct newcomers into a more embracing, socio-historically grounded concept of citoyenneté is helping to simultaneously nurture Salafist Muslim extremism in the Parisian suburbs (e.g. the Charlie Hebdo massacre), reinforce anti-semetic pressures bolstering Jewish emigration from the country, and invigorating anti-EU sentiment across broad swaths of the electorate outside of the Paris region, most pronounced in the electoral gains of the Front National.
It is my contention that, outside influences notwithstanding, the pernicious effects of monetary integration on almost every national economy of the Euro-zone, save Germany, significantly explains the current political strife in most Euro-zone states and the rise of partisan extremists on both the left and the right of the political spectrum. Taking this consideration in mind, the hope of a unified Europe, internally committed to the principle that the economic welfare of all members secures peace on the continent, might paradoxically rest on the potential for a breakup of the Euro-zone and either a reversion to former national currencies or the development of new regional or interregional currencies. Critically, whatever impedes the economic growth of peripheral economies and, hence, propels increasing quantities of labor from the peripheries toward the core economies will undermine the viability of the EU as the organizational basis for a consensus on European unity, anchored economically on free trade in commodities, free capital flow, free labor migration, and free flow of information.
The presence of a single currency does not follow from a basic commitment to sustainable and mutual economic development. Rather, it emanates from a fixation on the reduction of transaction costs from financial market exchange and speculative manipulation of nominal exchange rates. While such considerations are, of course, relevant to the larger question of how to integrate multiple national economies into a free-trading zone, reductions in financial transaction costs are not sufficient to produce free trade. Moreover, if the effects of monetary integration induce more intense rates of labor migration and capital flow, from the peripheries to the core, to chase more abundant opportunities for employment and profit, then a return to monetary heterogeneity might re-introduce the sorts of structural rigidities that made a common market in Western Europe both sustainable and mutually beneficial for its participants.
At this moment in Western history, the success of underlying principles advanced in the legacy of the Enlightenment is at stake. In the same way that an incident like the Charlie Hebdo massacre in Paris raises questions concerning the values of free speech/freedom of the press, the virtues of cultural heterogeneity in world cities, and the potential or salutary nature of more inclusive visions of citizenship, the wrong turn of European monetary integration has called into question the logic of international economic mutual interdependence as a force ensuring peace among the countries of Europe and undermining national parochialism and ethno-centric bigotry. A simultaneous failure of Europe to stand together against the resurgence of Russian nationalist, imperialistic ambitions in regard to Ukraine and other states on the Russian Federation's borders would, likewise, reinforce the potential for a return to an age in which economic liberalism no longer offers a meaningful argument against zero-sum militarist nationalism. In the nuclear age, human civilization cannot endure such a defeat.
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