The euro survives another night, perhaps another month, maybe longer than that. There is an unglamorous durability about the single currency. Each day, it is on the verge of collapse. Each night, it still seems to be there. The speculation that Greece would leave the single currency if the election result had been different was misplaced. All the potential winners were committed to the euro even if their policies challenged the criteria laid down for continued membership. Those criteria, though still impractically draconian, are flexible. Already the German Foreign Minister, Guido Westerwelle, has stated that "I can imagine we could do something in terms of the time frame." He will have no choice but to do a lot more than that.
The stakes are impossibly high because a Greek withdrawal from the euro would heighten the crisis and not alleviate the situation in the single currency and even in Greece. To some extent, Greece is the Jeremy Hunt of the single currency, remaining in place to protect other more important players. Almost certainly its withdrawal would not be cathartic, prompting Germany or the sclerotic European Central Bank to invest in massive protective barriers for Italy, Portugal and Spain. Instead, a precedent would have been established for others to follow, not defiantly but in a spirit of panic-stricken chaos. The catastrophic consequences of such an implosion were best described by Ed Balls in an interview for The Independent at the end of last year, more powerful because Balls was strongly opposed to Britain's membership: "2012 feels like the most dangerous year in my life. It is a very, very dangerous time... When it happens, there will probably be a crisis moment that puts things into deep freeze, making it hard to trade and hard to finance."
The image of companies inside and outside the eurozone going bust because they are unable to trade is a frightening one and worth retaining when some suggest that it is best if the whole project implodes. Such an implosion would solve virtually nothing. French and Spanish banks would still need re-capitalising, as the UK banks did in 2007 and 2008. Greece would still be bankrupt outside the euro. The UK is outside the single currency and is in recession. The euro is not the primary cause of the financial crisis.
The causes are many and deep. The solutions will be, too, but what is strikingly obvious is the need in the short-term for a renewed focus on growth in the eurozone and beyond, a focus that was fleetingly in place when the crisis erupted in 2008. Gordon Brown gets most media attention in the UK for his raging conduct during the New Labour era. Much more important in terms of impact on people's lives was his response in 2008 when much of his energy went on persuading other members of the G20 to adopt a fiscal stimulus. Given Germany's recalcitrant attitude now, his achievement appears greater in retrospective. The other key figure then was the newly elected President Obama, a leader of Keynesian instinct who was briefly so glamorous that he could have persuaded fiscally conservative leaders to have risked inflation rates in triple figures in order to achieve growth.
What followed was a perverse tragedy. Brown was kicked out of power and blamed in the UK for the entire global crisis. Obama lost control of Congress and the faith of one credit rating agency staffed by lofty figures in their twenties on holiday cover. Obama turned inwards. Cameron/Osborne replaced Brown and not only gave up persuading others to stimulate their economies but boasted that the rest of Europe was following similar austerity programmes to theirs.
The G20 summit in Mexico should be the location for a co-ordinated response managed with even more urgency than its equivalent in London in the spring of 2009. It will not be. Obama looks towards his election in November. Merkel goes to the polls next year. There is no sense of collective will among the leaders attending as there was to a limited degree at the London summit. Some of the key figures look to 1930s-style solutions even though there was evidence that their brief attempt at cautious fiscal activism was working.
The international paralysis and the deregulated profligate era that began in the early 1980s and ended in 2008 means the eurozone will continue to be in crisis, as will the UK outside it. Economic nationalism is an understandable but irrational response. Greece would not have much greater control of its destiny if it left the euro and would still face the unflinching demands of creditors. Economic sovereignty was limited long before the creation of the euro. As the former Conservative cabinet minister Leon Brittan noted in the 1980s, British sovereignty lasts for the 10 seconds before the pound follows the Deutchsmark in whatever direction the mighty German currency moves.
It is all a complete mess, but it is possible and, indeed, desirable that the messy solution includes the euro remaining in its present form. The eurozone countries are busking it, but in a context where there is not a single leader of any country that wants to leave. However terrifying, I prefer the busking to the apocalyptic alternative.Reuse content