In our helpless fascination with the oncoming train of the eurozone crisis we tend to think in dichotomies. If a collapse or breakup of the euro can be averted, we will all sigh a huge cry of relief and go back to our business, in a more responsible and fiscally sounder way, of course. If, on the other hand, the euro fails in spite of our best efforts, there will be crisis without end, pestilence, war, famine, and death.
There is no underestimating the ill effects of the latter possibility. As in any complex, dynamic situation, there are too many variables and interactions between them to reliably predict what would happen. Indeed, one of the implications of the catastrophe theory is that with the sudden loss of equilibrium in a catastrophic event, it is impossible to predict ex ante what is going to happen ex post. But we all have a strong sense it would not be pleasant and we would all rather not find out.
At the same time, provided we do not all disappear into a black hole, it is reasonably safe to assume that in the course of time a new equilibrium would emerge. Liberated from the constraints that made it impossible to escape the crisis, the European economy would likely find a new dynamic and generate new growth, albeit from a point way below the current level. The Argentinian financial crisis of 2001 and its aftermath are sometimes cited as a possible, though much smaller and simpler, precedent.
Still, the first possibility, that of forestalling the catastrophe and repairing the current model, is more palatable to just about everyone except the most hopeless disaster buff. But in thinking that simply averting the collapse of the euro will put us back on track may lie the germ of the next catastrophe. For the roots of the present crisis lie not just in the fact of some European countries living above their means and cooking their books to get away with it, but in the fact that we have all lived above our means and we have all cooked if not our books, then at least our mythologies. The inescapable fact is that while the growth in the eurozone and in the EU as a whole was going down, the expenditures of the EU and EU member countries were going up. According to the European Comission, EU “growth performance since 2000 has been very disappointing, below all the developed economies bar Japan and clearly behind most emerging economies.” The average annual EU growth for the decade was 1.56 percent. In the same period, the public debt of the EU as a whole grew from less than 60 percent of GDP to more than 80 percent. The EU budget grew by about 70 percent, not a terrible number for the decade given the EU’s expansion by 12 new members since its beginning, but certainly more than the growth for the same period would warrant.
There is only one possible interpretation of the data: the problems of the eurozone and the EU in general are not simply financial but structural in nature. We certainly need to put our house in order, but no amount of fiscal discipline and austerity measures is going to restart growth, and no amount of quantitative easing is going to alleviate the debt. To make a good use of the crisis, we will need to make a fundamental reassessment of how we work as Europeans, how we organize and regulate our economies and our societies, which of our policies are amenable to growth and which stifle it, which myths we subscribe to and which realities we ignore, how we earn our money and how we spend it. Otherwise we risk not so much a catastrophe as simply being left behind.