Euro! Which one?

The cover of last week’s Economist magazine showing a flaming meteorite-like euro about to crash and its telling title “Is this the end?” was a happy moment of journalistic instinct because it put in a literally graphic way what everybody – European societies and politicians – have been thinking, secretly or openly, for some time: that the tight economic and monetary union on which the eurozone has been operating for over 10 years is probably experiencing the last jolts of its existence.

It was not like this 10 years ago. Then, this fiscal straitjacket was worn willingly by the members who met the strictest criteria in their budgetary policies. After all, the initial idea was that by adopting the euro, each country of this European inner circle was promised economic stability and extra funds in order to align with the more powerful economies of the group. But this is not the early 2000s. And for the eurozone members who have entered a deep recession, this vicious circle of deficits, austerity and increasing public unrest has already affected the good operation of democracy, as economic technocrats are being appointed as heads of broad spectrum coalitions.

Already the fundamental structure of the governance of the eurozone has been shaking under the pressure of the crisis. The role of the European Central Bank as the responsible body governing the monetary policy of the eurozone, i.e., mainly keeping the inflation down, has proven increasingly insufficient to control the crisis. For some time now, louder voices from all corners of Europe and the United States are suggesting a rethink of the role of the ECB, by allowing it to issue its own “eurobond” and generally to become a more active player in managing the crisis. Even the European Commission itself finally came around to propose the solution of the “eurobond.”

But if there is any gain out of this crisis in the eurozone, it is that it brought out before the eyes of a highly skeptical European public the real picture of a power game that up to now was carefully covered behind the old declared principles of European idealism. As apparently the countdown of the euro has already started, according to some analysts, it becomes all the more obvious that it is Germany and to a lesser extent France that is the big obstacle to accepting any reform in the role of the ECB. The crisis in the eurozone showed the emperor without his clothes, it showed the inability of the European institutions to live up to their roles, and it revealed the nationalistic economic policies of Germany.

To support this last point, we should look at the recent news from Germany where part of the media, especially tabloids, have played a crucial role in shaping the feelings of the German public toward Europe while pumping up the importance of their own country. According to information published in the newspaper Welt am Sonntag, Merkel and Sarkozy are planning to set up an alternative Stability Pact, a kind of new Schengen Agreement, where only European countries with disciplined fiscal policies would be accepted. The German newspaper is predicting the official announcement may come as early as this week. If that is so, are we witnessing the beginning of the break-up of the eurozone as we know it? Is Germany about to apply a Plan B by abandoning the euro and creating a “new euro” area with countries that belong to its sphere of economic influence like Poland, Austria, Holland and others? Is the old euro about to receive its most serious blow by the country that supported it most?

There is certainly a funny smell around, and very soon we will find out whether it comes from the decay of the newest European institution the eurozone