Time For More Eurofudge?

The Euro-mess took another turn for the worse over the weekend following news that Standard & Poor’s has downgraded the debt of a flock of European countries, most notably France. Last night markets weakened across Asia as once again the rest of the world looked at Europe and wondered just how those people were going to get out of this debacle.

As Via Meadia readers know, while Franco-German politics are not the root cause of the eurozone’s woes, the deep division between Germany and France over the way a European monetary union should work is crippling the eurozone and has prevented a clear strategy from emerging to cope with the worsening, deepening and widening crisis.

France wants the ECB and the currency union to look like the French state writ large: a strong, centralized authority that supports the big corporations and banks at the heart of the French economy, eliminates the interest rate differential between Germany and France, and accepts external devaluation and internal inflation as reasonable ways to solve chronic budget and adjustment problems.

Germany wants a tight money policy for the eurozone, forcing reform and efficiency on “lazy” Club Med peoples through the impartial and predictable enforcement of firm and inflexible rules.

This is an old policy disagreement; what makes it important now is that overcoming the crisis in the eurozone requires Europe first to decide what kind of money it wants: a French or a German system. The danger of default, not merely in minor countries like Greece, but in large European economies like Italy and even, in a worst case scenario, France, pushes Europe toward answering the question it has long avoided: whose vision will shape Europe’s future?

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Read More at The American Interest By Walter Russell Mead, The American Interest