World Affairs

The Euro Crises

Assuming that the reader is familiar with the larger contours of the crises I am just going to launch into a few observations regarding the EU. I will concentrate on the security aspects of the situation mostly because these seem to have been ignored by most observers. It’s pretty obvious that the euro crises is a symptom of indigestion. Basically, the expansion was too rapid (by decades even) to allow for the proper structural adjustment needed to create a stable monetary union. One therefore needs to look at some very basic questions. What was the raison d’être for integration? Why were European elites so committed to expansion?

The EU as a security community 

The main security discourse in Europe in the post-war period has been the argument that Europe’s past should not be allowed to become Europe’s future. The notion is straight forward. If we don’t integrate, sooner or later the old balance of power logic will take hold again, leading to a self-propelling security dynamic like that of the late nineteenth century. Note that the claim that today’s Europe is so civilized that there is no threat of an all out war is nothing new. The discourse in the late nineteenth century was the same.

Then as now, European elites saw themselves as the torch bearers of civilization and the notion of a community based around the shared values of the Enlightenment was strong. This, of course, did not prevent the civilized powers from decent into barbarism. [Here I am talking about the Great War not the even more barbaric second one]. Hence, the received wisdom among European elites–with strong encouragement from across the Atlantic–has been that the only way to prevent a dynamic of increasing mutual securitization and great power competition is integration. They wanted a situation where war between European powers becomes unthinkable (whence the notion of a security community). Integration, therefore, must be defended at all costs.

The German problem

Europe’s principal security problem since the eighteenth century has been difficulty of accommodating a rising Germany. Under the skillful realpolitik of Richelieu and later French strategists, German unification was prevented for more than a century. Napoleon III reversed this long standing policy and encouraged German unification due to his general sympathy for nationalism. Prussia had been only one of the great powers in Europe prior to unification. Unification immediately created a significant great power which could compete with the established imperial powers on equal terms.

The transition was skillfully managed by Bismarck in a manner that avoided other powers from ganging up against the newly unified Germany. The ensuing commercial and industrial expansion in the last quarter of the nineteenth century created the “German problem”. Namely, Germany became too dominant on the continent–especially vis-à-vis the power that had been dominant until then–France. The established imperial powers–Britain and France–refused to accommodate a rising Germany. This was the fundamental dynamic in the antebellum Europe that led to the Great War. The post-war settlement failed to solved the German problem. In fact, by constraining Germany it exacerbated the problem and created the condition for the rise of Nazism. In the inter-war period Britain refused to give explicit security guarantees to France and hence opened up the space for a resurgent Germany to bid for supremacy on the continent.

At the end of the Second World War, the German problem was solved by American occupation and a thorough reconstitution of the Germany discourse which took militarism and great power aspirations completely off the table. Moreover, the cold war created a situation which security analysts call overlay whereby the security dynamics of a region are substantially suppressed by outside powers for an extended period of time. Nevertheless, the underlying structural problem may have been transformed but did not go away. Whence, the need for integration.

However, integration in Western Europe alone was recognized as not being sufficient to solve the German problem. German economic dynamism in the post-war period made it even more economically predominant in Western Europe than it had ever been. Whence, the need to expand the union. The idea being that in a larger EU, German dominance would be diluted. This was the impetus to an otherwise ill-considered expansion of the EU and the Eurozone. This introduced a signifiant fragility in the system and here we are.

German geoeconomic hegemony

The crisis in the Eurozone has resulted in a dramatic rise in the bargaining position of Germany inside the European Union. This was most spectacularly demonstrated in the last summit when Germany got all Eurozone countries (and everyone else in the EU except Britain) to agree to fiscal supervision by EU authorities. This implies a further erosion of national sovereignty and consolidation of power by the EU. With Britain virtually excluded and France increasingly weak and dependent, we basically have a situation where Germany unilaterally calls the shots. This is pretty much obvious to all observers. What one needs to grasp further is that this is a symptom of the underlying dynamics. German economic dynamism coupled with systemic weakness in both Britain and France has created a unprecedented situation of German geoeconomic hegemony.

A hegemon is a dominant power whose leadership is seen as legitimate and natural by others. What has happened in Europe is stunning. Not only does Germany hold the purse strings virtually alone. It is imposing its austere version of macroeconomic management on the EU and the acceptance of this is nearly universal. By sticking out for the interests of the City of London, Cameron has managed to radically isolate Britain. For more than a decade, Britain has had a consistent policy of retaining a seat at the table even as it stayed out of the monetary union and kept a foot in the Atlantic in other ways. Now it seems it will no longer have that seat.


The prospects for the euro remain bleak with the next round of crisis set for early next year when Spain and Italy need to roll over a hundred billion euros of debt each. By now, it’s becoming obvious that a breakup of the Eurozone is just a matter of time. What this means for the future of the EU, especially that of the security community in the long run is uncertain.

It’s possible that chunks of the periphery will basically exit the euro. Although this may mean an absolute debacle, it is quite immediate that the current trajectory for countries like Greece is unsustainable. At some point the populace will just refuse to accept further austerity measures and force their governments to leave the Euro and devalue. Another possibility is a radical restructuring of the EU whereby the core shrinks and coalesces around Germany, in effect, kicking out the peripheral countries (Greece, Spain, Portugal et cetera). It’s impossible to predict what exactly will happen to the euro itself but some things have become clear by now.

The current system will not survive unmutilated. It will take a while, perhaps years, for the situation in the EU to stabilize. German geoeconomic hegemony will intensify over time and Britain will be further isolated in Europe and look even more across the pond. Perhaps a new security order will emerge with an EU dominated by Germany as an independent pole increasingly in competition with the Atlantic and with the Magreb as its periphery. More immediately, we are going to see substantial market volatility in the new year jeopardizing the world-economy.

What was that Chinese curse again?               


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