To be or not to be European

As I sat down to breakfast at Washington’s Hay-Adams Hotel across from the White House this morning, I was greeted by the booms of a 21-gun salute. Alas, the salute wasn’t for me but for German Chancellor Angela Merkel, who is perhaps finding a bit of relief from the great economic crisis now gripping Europe ...

Andrew Harrer-Pool/Getty Images
Andrew Harrer-Pool/Getty Images
Andrew Harrer-Pool/Getty Images

As I sat down to breakfast at Washington's Hay-Adams Hotel across from the White House this morning, I was greeted by the booms of a 21-gun salute.

Alas, the salute wasn't for me but for German Chancellor Angela Merkel, who is perhaps finding a bit of relief from the great economic crisis now gripping Europe in a state visit to the United States. Who can blame her? Yet, it is critically important that she get back to the crisis as fast as possible and hopefully with President Obama's exhortation to think big, in terms of historical significance, and long-term ringing in her ears.

It is now clear that Greek debt will have to be restructured in some fashion. That almost certainly will then hold for Irish and Portuguese debt also, with Spain and even Italy waiting in the wings. But such a restructuring will be costly to the creditor banks and may require extraordinary measures to keep them functioning as well. Strictly taboo as recently as a few weeks ago, proposals by European Central Bank head Jean-Claude Trichet and other top leaders for the creation of a European Finance Ministry and the effective issuance of a European bond backed by all the eurozone members are now gaining traction. In effect, these leaders are saying that if the Europeans do not hang more tightly together they are almost certainly going to hang separately, to paraphrase Benjamin Franklin at the beginning of the American experiment.

As I sat down to breakfast at Washington’s Hay-Adams Hotel across from the White House this morning, I was greeted by the booms of a 21-gun salute.

Alas, the salute wasn’t for me but for German Chancellor Angela Merkel, who is perhaps finding a bit of relief from the great economic crisis now gripping Europe in a state visit to the United States. Who can blame her? Yet, it is critically important that she get back to the crisis as fast as possible and hopefully with President Obama’s exhortation to think big, in terms of historical significance, and long-term ringing in her ears.

It is now clear that Greek debt will have to be restructured in some fashion. That almost certainly will then hold for Irish and Portuguese debt also, with Spain and even Italy waiting in the wings. But such a restructuring will be costly to the creditor banks and may require extraordinary measures to keep them functioning as well. Strictly taboo as recently as a few weeks ago, proposals by European Central Bank head Jean-Claude Trichet and other top leaders for the creation of a European Finance Ministry and the effective issuance of a European bond backed by all the eurozone members are now gaining traction. In effect, these leaders are saying that if the Europeans do not hang more tightly together they are almost certainly going to hang separately, to paraphrase Benjamin Franklin at the beginning of the American experiment.

If these measures cannot be taken, the euro may well founder or become the currency of only a few countries. While that in itself might not be fatal, it could well trigger a chain reaction of events that would be extremely damaging and perhaps even fatal to the EU. Thus, the fate of Europe is truly being weighed in the balance as Merkel does her rounds in Washington.

That the president might be reluctant to speak out is understandable. The fates of the EU and the euro have never been exciting topics of conversation in Washington, where they are seen as bureaucratic, boring, and slightly anti-American. Moreover, there is very little the United States can concretely do to help.

Yet it would be a mistake not to express U.S. views and hopes on the situation. Boring as it may be, the EU is one of the great successes of the post-World War II era and perhaps the greatest mechanism for peace, democracy, stability, and prosperity in the world today. Portugal, Spain, and much of Eastern Europe are democracies today because of the EU. It was the EU that taught them about the rule of law, how to create impartial courts, how to have due process of law, how to create viable institutions, how to have incorrupt police forces, and much more. It has also been the EU that has created the world’s largest economy ($19 trillion to the $15 trillion GDP of the United States) and a zone of prosperity and peace in Europe unseen since the Roman Empire.

One small but powerful indication of the significance of the EU was revealed to me during a recent conference in Istanbul. The Turks have been trying to join the EU for a very long time and have faced continual frustration. At one point during the conference, I asked one of the Turkish participants why, after all these years of unsuccessful application to the EU, Turkey was still interested in joining, especially since it is such a trying, bureaucratic organization. His reply was illuminating. "Listen," he said. "Our bureaucrats here in Turkey are so bad we long for the Europeans to teach us how to run a modern ship of state."

The splintering and breakup of the EU would be a disaster of incalculable proportions for Europe, but also for the United States and for the world. Were it not for the EU, U.S. and Asian burdens would be much greater. This is why it is so important for Obama to speak up.

It is particularly important for him to speak up to Merkel because Germany holds the key to the future of Europe. As the EU’s biggest, most dynamic economy, Germany has probably been its biggest gainer. Certainly Germany’s huge trade surpluses are largely fueled by exports to the rest of the EU, and it is the EU that has made Europe comfortable with a resurgent Germany. Now, if the euro and the EU are to overcome the present crisis, Germany will have to bear the largest share of the cost. So far, it has been balking at doing so, and Merkel has been one of those most heavily dragging her feet. Of course, she has domestic politics to worry about and has consequently been playing to the narrow-minded view of many in Germany that the peripheral countries in Europe got themselves in trouble through their own profligacy and the frugal, hardworking Germans should not be called upon to bail out the others.

That kind of talk and sentiment may make Germans feel good, but it will solve no one’s problems. Thus it is important for Obama to appeal to Merkel’s and Germany’s better side and to urge that Germany choose to be European.

Clyde Prestowitz is the founder and president of the Economic Strategy Institute, a former counselor to the secretary of commerce in the Reagan administration, and the author of The World Turned Upside Down: America, China, and the Struggle for Global Leadership. Twitter: @clydeprestowitz

Tags: EU, Europe

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