Over the past two tumultuous years, Europe has lurched from one emergency rescue plan to the next in its attempts to resolve its debt crisis. Despite the creation of a massive bailout fund, the extension of billions of euros in loans to Greece and others, and the intervention in bond markets by the European Central Bank, the crisis threatens to boil over once again, putting the world at risk of a global economic slowdown. As the possibility of Greece's exit from the euro looms, these extraordinary policies seem little more than half-measures, and many are arguing that the eurozone's only hope for survival is to integrate even further, which would see the bloc issue joint bonds, guarantee euro bank deposits, and transfer some sovereignty over budgets to a central European authority. Are Europe's choices to break up or become a super state?
Yes. A limited federalism is the euro's only hope: Europe's only alternatives are to separate or become a superstate, says The Economist. Past rescue plans, compromised by German Chancellor Angela Merkel's hesitancy and brinkmanship, are "corroding the belief that the euro has a future, which raises the cost of a rescue and hastens the very collapse she says she wants to avoid." The break-up of the euro will surely result in economic calamity, and Germany and the rest of the currency bloc need to make a bigger commitment to the euro "to banish the spectre of a full break-up." This requires a "move towards federalism," since any smaller rescue plan "would be too modest to stem the crisis."
"The choice: A limited version of federalism is a less miserable solution than the break-up of the euro"
No. Federalism is only a long-term solution: Reforming Europe's institutions and remaking the continent's fiscal compact are necessary, but those are only long-term solutions to the crisis, says The New York Times in an editorial. "Right now, Greece and other weakened nations need an aid plan that will help them grow as they reduce their debt burdens." Merkel needs to drop her insistence "on the same draconian budget cuts and the same unreachable targets as the price of aid to Greece." If Merkel doesn't "figure that out soon, the consequences could be disastrous — for their countries and the rest of the world."
"The crisis this time"
And an economic union can only come with political integration: The notion that Europe "is a real community, not just a heavily worked-over blueprint" dictated by economic technocrats, has been shattered by the crisis, says Clive Crook at Bloomberg Businessweek. Resentment among nations is at a high, and popular opinion in several countries has turned against the euro. The European Union's seat of power in Brussels, Belgium, is remote to most European citizens. "Can there be fiscal union…without political union? And do Europe's divided nations…actually want to be one country?" The time has come to answer those questions, and Europe isn't prepared to do so.
"Who lost the euro?"