Will the euro be saved just because it has to?

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Often we hear the argument that the euro will not collapse because it is to the national interest of each of its member-states to prevent such an event. This is wrapped up in the phrase “the euro will be saved because it has to”.

Though this statement contains an element of truth, it is misleading for it assumes that the crisis can be solved just by political consensus, when in truth much more effort is required, such as the covering of the approximately 4 trillion euro of black holes that exist in the whole architecture of the single currency. Such a huge amount of fresh capital is not available in Europe at least within the current framework. Those who believe that the euro will be saved just because it has to, otherwise an unprecedented “calamity” will fall upon humanity, err fundamentally on neglecting the teachings we have learned from history, as far as political/international relations systems are concerned.

History has ample examples of “systemic failures”, i.e. of the inability of the international system to prevent an unpleasant event from occurring. Many times in the (recent) past did groups of states have to agree on what was to the national interest of all of them, yet despite that and even though everyone knew the consequences, they failed to turn the tide of events.

Next, the argument verges on being a moral statement rather than a realistic, objective thesis. It is fundamentally different to labor under the assumption that the world will move in a particular direction just because it “has to”; than saying that a series of complex issues need to be addressed, within a rigid time frame, under stressful conditions, implying that a solution may no longer be feasible and if it is, it will come at a very high cost that many may not be willing to accept.

The purpose here is not to elaborate on the various facets of the ongoing systemic crisis of the euro. Nor is it to propose any magic solution that politicians can implement to get us out of this mess. It is only to stress that unless European policy-makers deal with the issues of bank recapitalizations, debt restructuring, the role of the ECB, the democratic deficit, the future of the union and other related issues, the crisis will continue to evolve, the negative dynamics will keep gaining momentum.

It is one thing to identify the good. It is another to actually give to it material form.