Greek debt crisis: What will happen to the eurozone?
If the Greek debt crisis collapses Greece, Spain and Italy and even Germany could follow.
When the euro was in the process of being created during the 1990s, it was clear that it couldn’t ultimately survive without a European Ministry of Finance and the coordination of tax and fiscal policies for the whole of the eurozone. This was to be the necessary next step after the establishment of the European Central Bank.
Of course, because the Berlin Wall fell just as the long process of preparation to launch the euro was getting under way, “enlargement” overtook the agenda of the “deepening” of Europe. That is why today Europe is such a strange animal – a union with a central bank and single currency but without a ministry of finance to coordinate fiscal and tax policies across a series of independent sovereign states.
Now Europe faces a moment of truth. We are now realizing that having a single currency means there must be a great deal of solidarity across the eurozone or everyone will suffer. If Greece fails, so will Spain and Italy and even Germany and the rest.
There are a lot of assets at stake because European economies have become so intertwined through the transactions of the euro economy that, as with the securitized mortgage crisis, no one really knows the full extent of risks that might emerge out of this black box if Greece defaults.
Simply, integration has gone too far to allow the financial collapse of Greece or any other state in the eurozone.
Though first appearances might suggest that this crisis is pulling Europe apart – for example, the great resistance of the German public to bailing out Greece if it comes to that – in fact, the end result will be that it will compel Europe to complete its “deepening” agenda.
This is exactly what happened at the moment of the creation of the euro. Many were reluctant at the outset to use the euro. But the single market of the European Community was impossible to sustain without a single currency. It became clear to everyone that if you had a single market with different currencies, you would have trade competition by devaluation. A single currency was thus the only option if Europe wanted a single market. So, even if reluctantly, everyone who wanted to benefit from the single market had to join the single currency.
Today it is the same. Even if opinion is for the moment against a single tax and fiscal policy for all of Europe, Europeans will have to go along at some point.
Without it, the euro will not survive. Since everyone has too much to lose, first we will witness, as we are already beginning to, a de facto coordination of policies. In the coming years, that coordination will be institutionalized as it was envisioned at the outset – a European Ministry of Finance to go along with a European Central Bank.
Greece was the birthplace of Europe. And the Greek crisis today will, in the end, have been the midwife of the completion of the European project.
Jacques Attali, formerly the top aide to French President François Mitterrand and the founding president of the European Bank for Reconstruction and Development, is now president of PlaNet Finance. His most recent book is “A Brief History of the Future.”