Marilyn, of the Economics department, opened the discussion by laying out the problem in the Eurozone: the creation of a currency union among countries with different economies, histories, cultures, tax rates, fiscal systems, legal framework – with no controlling political institution in parallel. While policymakers mull over the question, “How to prevent financial contagion from region to region?”, Marilyn explained that each European nation has its own economic challenge: Greece’s political fallout; Italy’s domestic debt; Ireland’s domestic speculation; and Spain’s foreign speculation. You cannot have a common monetary system without a common fiscal system.
The European Union’s reluctance to bailout Greece has sent the country in a downward spiral. Punitive austerity programs will more likely do harm than good, as cutback on social programs and government spending will invoke high interest rate and increase the nation’s debt. Marilyn predicts that the failure of Greece’s economy will result in negative multiplier effect to the rest of the European country. The European nations will have no choice but to bailout Greece.
“Capitalism has generated a problem that capitalism cannot control,” commented Eduardo, a Spanish faculty member. He observes that Europe is not perceived the way it used to be. While the European crisis has highlighted that change, there is a great deal of interest from France, Germany and Spain to preserve that identity for their nations to draw political strength from.
Roland from the German department further argued there is a trouble with the idea of a common Europe. “Europe has no identity. It lacks a common history, a common language, a common culture.” Without a European constitution, the European Union will continually face structural deficits that unable it to speak with one voice. The disunity of European politics is evident in its wavering response to the threat of Greece’s default. As was written in the New Yorker, if anything, a majority tends to revert to the most basic political act of all – “throw the bums out”.
From the historical perspective, Jeff recalled the prescriptions of the two influential economists in the reconstruction of Europe post World War II. Ludwig Erhard created a social market economy that brought prosperity to the Germans and social safety net. Similarly, Charles de Gaulle’s right hand man, Jean Monnet, advocated economic diplomacy that is best captured in his words: “There will be no peace in Europe, if the states are reconstituted on the basis of national sovereignty… The countries of Europe are too small to guarantee their peoples the necessary prosperity and social development. The European states must constitute themselves into a federation…” Europe can benefit from a harmonized centralization in the long run. “It’s hard to see anything less would work,” Jeff concluded.