Euro-Crisis Brings Endemic Problems to the Surface

Both the EU and the eurozone (the countries that have adopted the Euro) remain decentralized and weak, the author says, and the constituent national governments continue to maintain their individual prerogatives. At the same time, they remain acutely aware of the their own regional history and the potential dangers of extreme nationalism.

Both tendencies are at work, but in recent years France and Germany have in fact been making the key decisions while the influence of “super-nationalism,” centered in Brussels, has taken a back seat. One consequence, according to the author, is that U.S. companies doing business in Europe should keep in mind that a presence is Brussels is not sufficient to influence EU policy.

Meanwhile, weakness of the European centralized institutions and the disconnect between their ostensible power and the de facto power of national governments has contributed to “euro-skepticism.” The European Central Bank for its part has followed the conservative German Bundesbank model, with dampening inflation as opposed to fighting recession and “stagflation” its prime objective.

Recent polls show that most EU citizens don’t want the eurozone to collapse, but they do want it to be better managed. It’s not clear, however, that the European institutions will prove capable of reform, allowing the ECB to play a greater role in solving the current crisis. What is clear, the author says, is that the United States and the entire world economy have a stake in the success of single European currency.