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.