Friday, February 01, 2013

Europe and the 'muddy middle of variable geometry'

As someone who pretty regularly reads the German financial press (well, at least the FAZ and the now late-and-much-lamented Financial Times Germany), there were moments last year when I felt like I had stumbled into an alternate universe when visiting Britain (which--for research reasons--we often did).

The euro crisis, of course, was a press obsession both (here) in Germany and (there) in Britain, but what struck me was the confident expectation auf der Insel (tinged with more than a bit of Shadenfreude in many cases) that the single currency was doomed.

'So', I remember a friend in London saying, 'how do you feel about the euro breaking apart?'

My statement that it was a bit premature to say that and suggestion that eurozone governments--though not exactly experiencing their finest hour--would probably find a way of muddling through in classic EU fashion, were greeted with scepticism.

Thus, I had to laugh yesterday when we heard a radio report on the way back from work in which at least one financial analyst expressed concerns that the euro was now too strong, potentially weakening European exports.

And -- though I'm far from an expert on this and am well aware that problems remain (and that the whole thing may, indeed, some day fly apart) -- I thought that Philip Stevens's article in the Financial Times about Anglo-Saxon gloom-mongering was well worth reading.
The end point for the eurozone looks likely to be a much tighter economic union but one falling short of political federalism. Nemat Shafik, the deputy managing director of the IMF, put it well at a recent gathering in Paris of the Franco-British Colloque. Europe’s destination probably lay in the “muddy middle of variable geometry and hybrids between federal and intergovernmental solutions”.  
The euro still confronts formidable political and economic challenges – though those who blame everything on the single currency must also explain why Britain is in a bigger mess. No one can be sure the currency will survive in perpetuity. History says that monetary unions often break up. But at least we know now that the politicians will not give up without a pretty ferocious fight.
Which is, I think, good news.