I am not arguing that these forces will necessarily win. It could break up. But I think people underestimate the strength of these forces. Indeed, in their absence it would have already gone. Since the crisis began three years ago, the eurozone leaders have done much to keep it together.
They’ve created new funds. They have allowed the Central Bank to take enormously aggressive positions of various kinds. Big reforms have happened in countries. Governments have been overturned; they’ve got new governments, sometimes technocratic governments. And they are implementing very painful reforms. So that’s an indication of the seriousness.
The forces? First, the eurozone was the capstone of a project of economic and political integration that goes back to the 1940s. It was started after the war to end the history of division which, in the view of the European elite, had led to endless devastation. This was particularly important for the two leading powers, Germany and France. It was France that promoted this European single currency, and Germany, at the time of unification, conceded it as a way of remaining locked into Europe.
Secondly, it’s the capstone of the process of market integration, particularly the single market. It’s a very strong view in the eurozone, that you cannot have a completely open single market without fixed exchange rates when there are so many countries. It’s rather different from North American Free Trade Agreement (NAFTA), which is really one huge country with two rather smaller ones attached.
But here we’re talking about 17 members. If all their currencies were moving all over the place, nobody would know what was going to happen. Businesses couldn’t plan for the integration of production. The capital market couldn’t integrate. So having fixed currencies, or basically eliminating the currency risk, was essential.
Then there’s the German question. Germany is obviously the dominant power in Europe. Having the European Union and the eurozone around Germany has provided it with stable relationships with its neighbors. It has given its neighbors the belief that, in some sense, Germany is under control. So from both sides, the European Union and the eurozone have proven a really effective way of handling Germany.
And finally, the weaker countries—Spain, Italy, Portugal, Greece, Ireland—have had very troubled political pasts. The European project has been seen as the guarantor of political stability, democratic values, and economic stability. It’s given them all—particularly their elites, their young people—a sense of being part of a project of civilization, and in Spain’s case, after centuries of isolation and impoverishment. So for all these reasons—and I think it’s worth spelling them out—the forces behind this huge European project are far more than merely economic.