During my recent ten-day business trip to Europe (Netherlands-Germany-Romania), I took advantage of any opportunity I had to query my colleagues on what they thought of the current Eurozone crisis. What were the causes of it and more importantly, how did they think it would be resolved (assuming it could)? The sample size of the respondents was admittedly quite small, but it still was interesting to hear the perspectives of Dutch, Germans, and Romanians on this pressing matter and to note the differences and similarities between their responses.
The prevailing attitude among the Dutch was that while they were none too happy about having to bail out the Greeks, they still were supportive of the Euro and reluctantly accepted having to shoulder the burden to support less stable countries. This does make sense if you consider that the Netherlands is a small country that relies on exports for much of its growth. They would suffer if there were to be changes to the easy access to the European markets and shared currency that they now enjoy. But they did say that resistance to the Euro and further European integration was growing within the country and that the longer the current crisis dragged on, the stronger this movement would become.
This is reinforced in a front page article in today’s WSJ called Doubts Arise in Euro’s Birthplace:
The debt crisis convulsing the 17-nation currency zone has sown doubts even in a place regarded as the cradle of the euro.
The Netherlands' open and trade-based economy has long made it one of the strongest supporters of a more integrated European market. About twice the size of New Jersey, the country ranks as the world's 16th-largest economy, with global competitors like Philips Electronics NV and chemical giant Akzo Nobel NV. Fiscally healthier than even Germany, it has been a key proponent of budgetary rectitude among euro members, and supplied the European Central Bank with its first president.
Now, as financial anguish in the euro zone reveals flaws in the monetary union, the crisis is exposing deep divisions not only among Europe's national leaders but even within the consensus-minded and long-supportive Netherlands. A unified pro-euro position projected for years by the Dutch political and economic establishment has begun to crack.
If these cracks continue to spread and deepen, the entire proposition of a more united Europe could be in jeopardy.
The concern, he says, is that divisions over the common currency in traditionally pro-euro countries like the Netherlands make additional big and painful solutions to the crisis harder to achieve, and an eventual unraveling of the common currency more likely.
That’s why the longer this crisis continues, the more danger it poses to European union. If you lose the Dutch, it will make solving the current problems that much more difficult and would be a bell weather on the direction that Europe heads in the years ahead.
Of course, the country that matters the most to the future of Europe is Germany. The discontent among Germans about having to bail out and prop up their weaker Eurozone partners is well-known. One aspect of this attitude of being out upon that I had previously not appreciated is that how Germans in the western part of the country view the subsidizing of Greece, Italy, Portugal, etc. as a continuation of the sacrifices they had to make to rebuild the eastern part of the country after the Wall came down. For twenty-years, they’ve not been able to invest in their infrastructure because so much of their money went toward the east. Now that many of the roads, airports, bridges, etc, in the east have been brought up to or even surpassed their previous standards, they want to focus on their own back yards for a change. So when the PIGS come a callin’ asking for the German taxpayer to dig a little deeper to pick up their tab, you can understand their frustration.
The danger in Germany is the same as in the Netherlands. The longer the crisis drags on without resolution, the more this attitude is going to gain traction among the populace and to impact the political situation. Parties less enamored of the European project will gain strength and could tip the scales at some point soon.
Meanwhile, the Romanians I spoke to see the Euro as their path to growth and modernization. I was in the city of Cluj in the northwestern part of the country and the orientation among the people there is definitely to the west. For a developing country, the allure of the EU is easy to understand and they can’t imagine alternative paths to prosperity at this point.
One thing that almost everyone I spoke to did agree on was that Europe has reached a moment of decision. The current model is not working and can’t be sustained. There must either greater union or inevitable division. No one believes that the latter will occur, yet no one could really explain what the former would look like.
Mr. Klamer, the economics professor, was among the few in the Netherlands speaking out persistently against the project. "A monetary union without a political union is impossible to maintain," he wrote in a newspaper article in 1991. Some other Dutch economists voiced similar concerns but fell largely in line as monetary union became inevitable.
This is exactly what I would always challenge them with. Europe’s monetary union is not working and it’s obvious that it will only be successful with some sort of political union. So what will that political union look like and what will it mean for individual countries? This is where almost everyone became uncomfortable with the conversation and there was a lot of shrugging and puzzled looks. They all seem to believe that the only possible outcome is greater integration and political union of some flavor. And they all assume that somehow they will arrive at this solution although no one really has any idea of how.
Herein the real danger to Europe unity lies. The reality is that other outcomes are not only possible, but become more likely when there is no common understanding among those who favor a more unified Europe of what that next stage of unity will look like. They assume that’s the direction that the countries of the EU will move in, but if they can’t articulate a vision of what they would really mean they aren’t going to be able to make the case for it.
One thing that you hear people talk about a lot in Europe is culture. Americans are sometimes accused of being obsessed with race and you could say the same thing with Europeans and culture. But they do grasp more than most Americans do just how important culture is.
Reynier van Bommel, the ninth-generation CEO of a family shoe company that bears his name, says the finishing process on its shoes has benefited from training he received in Italy. But he has concluded that cultural differences within Europe, and a resulting disparity in productivity, make a common currency unrealistic.
"How are we going to explain to the Greeks that they need to work longer hours there because they are less productive than the Dutch?" says Mr. van Bommel, 38, walking through his factory in Moergestel. "So we have one currency, but there is no one Europe."
There is no one Europe today. And it’s hard to see how there will be one in the future. If you look at the history of movements that attempt to unify people politically, you will usually find strong leaders that drove that unity with a purpose and a vision of what it would mean. Where are the current leaders in Europe who could do that today? Or tomorrow?