Europe at the peril of the Euro

Note kindly translated by Anne-Marie de Grazia

The Greek crisis has turned into a crisis of the European Union. Whatever the outcome, the very foundations of the European Union have been shaken for good. The prolongation of the reunion of the Eurogroup, supposed to end on Saturday, July 11th, and which was extended to Sunday 12th, the cancellation of the European summit of Heads of States and Governments, are evident signs of the amplitude and depth of this crisis. There will probably be no winner, unless the conditions put by Germany are submitted to, but there will be many losers. In the first ranks of which will be the fanatics of the European construction, the talibans of the Euro. Because the real cause, the evident cause of this crisis is not the problem of the Greek debt, but the functioning of the Eurozone, which sets up the peoples against each other and which is reviving the worst memories of European history. If the European Union and Europe are two different things, what is at stake in Brussels is no longer Greece or the Euro, it is the future of Europe and the very existence of the European Union.


The responsibility of the Euro

It is forthwith evident for all the observers that the deep cause of this crisis must be sought in the functioning of the Eurozone. This has been written many times in this carnet. The project of the creation of a single currency, without insuring at the same time the economic as well as institutional conditions for the viability of this currency, could only bring about a disaster. One should have come down to establishing a “transfer union.” This was never done. If, in federal countries such as India, Germany or the United States a single currency can function despite sometimes extreme divergences existing between the territories composing them, this is due mostly to the existence of considerable transfer fluxes. This could not be implemented within the Eurozone because of the opposition of many countries, but above all because of the absolute opposition of Germany.

Many of those who write in favor of the Euro are therefore lamenting over what they call « German egoism. » [1] They never take pains to seek to measure what it would cost Germany to finance these transfer fluxes. The calculations have been presented in this carnet [2]. They would amount to around 260 billion euros a year, over a ten year period, and this only in order to help the 4 Southern countries of the zone: Spain, Italy, Portugal and Greece. Of this sum, one can foresee that around 85% to 90% would be contributed by Germany. So that one reaches a debit on the wealth produced by Germany comprised between 8% and 9% of GDP. One source even estimated this debit at 12%[3]. It is clear that imposing such a debit on Germany would destroy its economy. The question therefore is not that Germany doesn’t want to (that’s another problem), but above all, that it can’t cope with such debits.

Confronted with the impossibility to implement a transfer union, the governments of the Eurozone have thought to find salvation in a combination of austerity cures, the recessive effects of which have fragilized European economies, and of a relatively expansionist monetary policy such as is carried on by the European Central Bank. But this monetary policy, if it has permitted to bring down interest rates, has not solved the problem. It’s like wanting to cure pneumonia with aspirin. Aspirin has a beneficial effect in making the fever go down, but it does not cure the illness.

So that the Euro has dragged the economies of the member countries of the zone into a logic of ever stronger divergence. This logic lead to ever more violent austerity plans, which exasperate the populations and set those of the countries with fewer problems up against those of the countries suffering the most. Far from being a factor of unity and solidarity, the Euro leads to an unleashing of egoism from all parties and a rise in political tensions within the European Union. The Euro, by its very existence, is indeed the source of the crisis of which the twists and turns in Brussels during the week-end have been an illustration.


The responsibility of politicians

If the first responsibility of this crisis falls onto the Euro, and onto the institutional system which has been built in order to make it endure, this does not exonerate the political personnel. In the contrary; their behavior has tended to exacerbate the crisis in provoking a massive loss of confidence of the peoples of the European Union in said Union.

It has suddenly become in good taste to lash out against Mrs Merkel and M. Schäuble. Their responsibility is immediately engaged. The plan presented by Mr Schäuble on Saturday, July 11th, which foresees either the expulsion of Greece, or pawning part of the industrial patrimony of the country, is perfectly scandalous. Both leaders are behaving like small-time hoodlums trying to terrorize the neighborhood. But it must be said here that they are probably not the worst. Moreover, one must grant Mr Schäuble a certain coherence in his position.

Among those whose responsibility is certainly greater we must mention the President of the Eurogroup, Mr Dijsselbloem. This sorry character has exerted threats and real blackmail on the Greek Minister of Finances, M. Yanis Varoufakis. The latter has described this very explicitly [4]. He shows that these detestable practices are not a product of the crisis (which, without justifying them in any way could at least explain them) but they have started with the very first meetings going back to February 2015. These practices, as well as those of Mr Jean-Claude Juncker, le President of the European Commission, display the profoundly anti-democratic spirit which reigns in the instances of the European Union. The practices of these leaders, and before them of persons like Mr Barroso, have largely contributed to the loss of credibility of the peoples in these institutions. In November 2012, a public opinion poll carried out over all of the European countries showed that the percentage of people who said that they did not trust the European Union was 42% in Poland, 53% in Italy, 56% in France, 59% in Germany and 72% in Spain[5].

But the good apostles of the European construction themselves, such as Mr François Hollande, cannot – either – hope to come out of this crisis unscathed. Their responsibility is in reality engaged as much as the one of the other politicians. If Mr Hollande had been faithful to his engagements of the Presidential campaign of spring 2012, he would have confronted the German Chancellor immediately and squarely. Instead, he accepted to enter into the austerity logic which she was proposing and he gave in, in all or in parts, to what she was demanding. It is logical, then, that Mrs Merkel should have felt comforted in her choices and that she should have pushed them to the end of their absurd and dire logic when it came to Greece. Mr Hollande has been trying over the past days to give us a different music to hear. But it is only too obvious that the man is already campaigning for reelection. At base, he is a good representative of these fanatics of the European construction, these “euroblessed, » the attitude of whom will end up breaking up the European Union.


One must act

At the point at which we have arrived in this crisis, responsibility needs to be taken. What is at stake is not only the fate of 11 million people, which is a lot already. It is in reality the fate of the 510 million inhabitants of the European Union which is today thrown onto the scale. Behind the fate of Greece, which is being left alone to manage a flux of refugees amounting to 1000 people/day, it is the reality of the European Union which is at stake.

We must today admit that the Euro is not viable within the present framework, and that changing the framework, moving to « federalism, » as some are invoking, is impossible. So that consequences must be drawn and one must proceed to a coordinated dismantling of the Eurozone. Let’s think it over real hard; this dismantling, if it is undertaken in a coordinated way, will be an act of union. There is no shame in recognizing that the necessary conditions not having been fulfilled, the single currency cannot be viable. There is no shame in this, except if one makes the Euro into a fetish, a new idol, a religion. And this is precisely what is so worrisome. For many leaders in the countries of the European Union, the Euro is not an instrument, it is a religion, with its high priests and its excommunications. For the alternative will be the « Grexit », in reality the expulsion of Greece out of the Eurozone, an act of unheard of violence, following which everybody will understand that it is only the beginning of a process. Once Greece is out, eyes will turn on the next one, and on the next one. We will end up then with a slow implosion of the Eurozone, in a din of recriminations and reciprocal accusations, of which the Eurogroup of Saturday 11th will have been only a timid announcement. The European Union, it must be known, will not be able to withstand this. It could certainly withstand a coordinated dismantling, under the control of the European Council, and with the participation of European institutions. But it will be quite a different matter if we let ourselves go down the road of facility, or if we let the European Union fall apart in the wake of an expulsion of Greece.

Today, time is short. The European leaders can make the saving choice of a coordinated solution. If they come to recognize that the Eurozone is not viable, everything is possible. If, in the contrary, they dig themselves in, either out of ideology or because of short time interests, in desperate attempts to make the Eurozone survive, sacrificing one country, then another, than a third, they will put in motion the infernal machine of the explosion of the European Union, and they will bear before History the responsibility for the inter-European confrontations of the future. The European Union can perish, or transform itself. The important thing is to save the European spirit, a spirit of fraternity and of solidarity. This is what the Euro is threatening today.

[1] See Michel Aglietta, Zone Euro : éclatement ou fédération, Michalon, Paris, 2012.

[2] See Sapir J., « Le coût du fédéralisme dans la zone Euro », note publiée sur le carnet RussEurope, 10 novembre 2012,

[3] Patrick Artus, « La solidarité avec les autres pays de la zone euro est-elle incompatible avec la stratégie fondamentale de l’Allemagne : rester compétitive au niveau mondial ? La réponse est oui », NATIXIS, Flash-Économie, n°508, 17 juillet 2012.




Jacques Sapir

Ses travaux de chercheur se sont orientés dans trois dimensions, l’étude de l’économie russe et de la transition, l’analyse des crises financières et des recherches théoriques sur les institutions économiques et les interactions entre les comportements individuels. Il a poursuivi ses recherches à partir de 2000 sur les interactions entre les régimes de change, la structuration des systèmes financiers et les instabilités macroéconomiques. Depuis 2007 il s'est impliqué dans l’analyse de la crise financière actuelle, et en particulier dans la crise de la zone Euro.

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