How the debt crisis is shaping Europe’s future

Marketplace Staff Nov 11, 2011

How the debt crisis is shaping Europe’s future

Marketplace Staff Nov 11, 2011

Kai Ryssdal: It feels — today anyway — as though Europe has taken a step back from the edge of the economic abyss. But on the theory that this story’s looked like it’s played itself out before, we thought it might be good to understand how we got here in the first place.

For that we’ve called Steven Weber. He teaches political science at the University of California, Berkeley. Good to talk to you.

Steven Weber: Delighted to be here.

Ryssdal: I wonder if we can say that we have now come full circle with European Union. We’re having economic problems play out politically — which gets us back to the beginning of this thing — which was economics and politics after the second World War.

Weber: I think that’s right Kai. The EU, first and foremost is really a political project that’s wrapped up in a kind of economic brand. And particularly for people outside of Europe, we focus on the brand rather than the underlying political project. And we need to pay more attention to what that is.

Ryssdal: Well, explain that a little bit because the thing that’s putting the fear of god into everybody is the economic facade, the brand.

Weber: Yeah, exactly. Well if you go back to the early days. I mean, why was this thing created in the first place? It was a creature of the Second World War fundamentally. The Germans and the French got together in what people thought at the time was a marriage of convenience but really was deeper than that. It was a deep romance based on a conviction that after two World Wars and the kind of trauma that these countries faced in the first half of the 20th century, they really had to bind their fates together fundamentally. And the best way to go about that ultimately was by binding economies together and that’s where it all started, in the European coal and steel community.

Ryssdal: Wow. The European steel and coal community, which begat the European economic community and that turned into the E.U. — if I have my dates right.

Weber: Exactly, so think about it. You know, if it’s 1951 and you have two countries that want to find some way to commit to each other that they’re never going to go to war with each other again, what better way than to combine your coal and steel industries? I mean, you can’t mine coal, you can’t make your own steel. It’s pretty hard to develop a modern army.

Ryssdal: So, let’s skip a couple of decades then and get to the single currency, the euro, and where that plays into this whole thing. Right? Because it seems to me we have two topics. We have the European Union and then we have the eurozone.

Weber: The Cold War ends in 1989. And that looks like a great moment for Europe except that what it means is that: What are we going to do about a reunified Germany? And so the Europeans — typically in a case like that — see a crisis, look for a solution, kick kind of the can down the road for a year, two years, three years and eventually come up with idea of economic and monetary union. And before you know you have a single currency called the euro.

Ryssdal: And yet we also have over there a central bank that can’t dictate terms to all — I guess it’s now — 17 members? And there are structural problems that sort of get us to where we are today.

Weber: Well, as is often the case in all kinds of monetary unions, you know, you solve one problem, you create another. If you have a single currency but you have essentially autonomous fiscal policies, you’ve got an imbalance in the system. But, you know, if the Americans, if we were all sort of fell into a period of complacency about our housing market during the last decade, the Europeans fell into a complacency about that imbalance with their independent fiscal policies. And people sort of forgot it ultimately wasn’t going to work.

Ryssdal: Well, as we look back then — let’s say five years from now — whenever we get to the other side of this crisis, what does the European Union look like then?

Weber: I think the one thing we can rule out is — at least I believe we can rule out — is a break up of the European Union. For this generation of European leaders, a conscious decision to break up the European Union would be perceived as the equivalent of a conscious decision to go to war. It wouldn’t be that decision but that’s how it would feel to them. And so, the question is, what will they pay to get to the other side? So I think five years from now, we may see a Europe that is meaningfully smaller in some respects, but more tightly coherent and better balanced.

Ryssdal: Steven Weber. He’s a professor of political science up at the University of California, Berkley.

Weber: Thank you.

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