28 December 2011

Wolfgang Münchau: Grim lessons from the 30 years war

The financial crisis has given rise to several historical comparisons, not least the Great Depression. Münchau invokes another for the eurozone crisis - the 30 years war, which ravaged central Europe from 1618 to 1648.

Both the eurozone crisis and that terrible war occurred amid sudden power shifts; they were triggered by seemly trivial events; and they became incredibly complicated. They are also marked by sudden regional power shifts.

The eurozone, too, has been subject to an internal power shift in the past five years, with the relative rise of German economic power. The eurozone crisis also had a comparatively trivial trigger, a fiscal meltdown of a small country at its outer perimeter. This too unleashed a wider economic conflict between a largely Protestant north and a Catholic/Orthodox south. When the eurozone’s modern rulers assembled in Brussels this month to sign the modern equivalent of a peace treaty, they were interrupted by the cross-current of a much older conflict – a UK-versus-the-rest dispute. So instead of one peace treaty, they ended up with two overlapping and interacting conflicts. Europe is once again getting absurdly complicated.

There are other obvious differences. Nobody is fighting over land any longer. One of the undoubted achievements of the European integration process has been the transformation of conflicts into theatrical late-night summit disputes that are so much at the heart of political life in Brussels. We have of course progressed.

But what remains unchanged from those times are the underlying cultural conflicts between Protestants and Catholics, north and south, Britain versus the Continent. The many decades of European integration have not ended this fundamental mistrust. This is also one the reasons why the Europeans have created such an irrationally unbalanced monetary union. Its rules were not the result of a rational economic argument, but designed to allay very old German suspicions.

I see the most disturbing parallels between the way the 30 years war has ended and the way Europe’s political leaders are setting about to resolve the current crisis. The crisis management in the eurozone may also end in fragmentation. I see the three following scenarios as the most plausible outcomes: a political union with a joint debt instrument; the status quo enforced by eternal austerity; or a break-up.

No matter which is chosen, it may also lead to an unstable equilibrium. A political union would solve the narrow crisis, for sure, but may weaken democratic legitimacy, and may thus become unstable. German-imposed austerity is the solution most likely to trigger political extremism and violence. It is also inherently unstable because it imposes the economic doctrine of one country on another. A break-up of the eurozone will, at worst, destroy the European Union itself or, at best, return us to the situation of the early 1970s.

The treaty of Westphalia ended the 30 years war in 1648. It was the early modern period equivalent of what Herman Van Rompuy, the president of the European Council, would nowadays call a comprehensive resolution. Neither addresses the underlying conflicts. The 30 years war shows that we Europeans have been delaying making the necessary hard decisions for a long time.

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