10
Jun

By Clyde Prestowitz

As I sat down to breakfast at Washington’s Hay-Adams Hotel across from the White House this morning, I was greeted by the booms of a 21-gun salute.

Alas, the salute wasn’t for me but for German Chancellor Angela Merkel, who is perhaps finding a bit of relief from the great economic crisis now gripping Europe in a state visit to the United States. Who can blame her? Yet, it is critically important that she get back to the crisis as fast as possible and hopefully with President Obama’s exhortation to think big, in terms of historical significance, and long-term ringing in her ears.

It is now clear that Greek debt will have to be restructured in some fashion. That almost certainly will then hold for Irish and Portuguese debt also, with Spain and even Italy waiting in the wings. But such a restructuring will be costly to the creditor banks and may require extraordinary measures to keep them functioning as well. Strictly taboo as recently as a few weeks ago, proposals by European Central Bank head Jean-Claude Trichet and other top leaders for the creation of a European Finance Ministry and the effective issuance of a European bond backed by all the eurozone members are now gaining traction. In effect, these leaders are saying that if the Europeans do not hang more tightly together they are almost certainly going to hang separately, to paraphrase Benjamin Franklin at the beginning of the American experiment.

If these measures cannot be taken, the euro may well founder or become the currency of only a few countries. While that in itself might not be fatal, it could well trigger a chain reaction of events that would be extremely damaging and perhaps even fatal to the EU. Thus, the fate of Europe is truly being weighed in the balance as Merkel does her rounds in Washington.

That the president might be reluctant to speak out is understandable. The fates of the EU and the euro have never been exciting topics of conversation in Washington, where they are seen as bureaucratic, boring, and slightly anti-American. Moreover, there is very little the United States can concretely do to help.

Yet it would be a mistake not to express U.S. views and hopes on the situation. Boring as it may be, the EU is one of the great successes of the post-World War II era and perhaps the greatest mechanism for peace, democracy, stability, and prosperity in the world today. Portugal, Spain, and much of Eastern Europe are democracies today because of the EU. It was the EU that taught them about the rule of law, how to create impartial courts, how to have due process of law, how to create viable institutions, how to have incorrupt police forces, and much more. It has also been the EU that has created the world’s largest economy ($19 trillion to the $15 trillion GDP of the United States) and a zone of prosperity and peace in Europe unseen since the Roman Empire. Read more…

As published in www.foreignpolicy.com on June 8, 2011.

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