July 19, 2015
Some seventeen centuries ago, emperor Diocletian realized that the Roman empire had grown too big and too diverse to be ruled from a single centre. Diocletian therefore decided to split it in two, the west ruled from Rome by a fellow army officer and the east controlled by himself. The east-west division became more or less permanent during the reign of Constantine. It was a wise administrative decision, which saved the integrity of the empire for another hundred years.
Fast forward to the present. The European Union, built on the ruins left behind by World War II, is experiencing a similar if not identical predicament. The citizens within its 28 member-countries, are growing more and more disenchanted with the Union’s leadership by the day. Truth be told, the EU has become much too big, too culturally diverse and politically unresponsive to continue to be viable in its present form.
One of the chief characteristics of the current political arrangements in the EU is Germany’s hegemonic status over its economic and political structures. As we can all recall, the Union was formed in the wake of WWII in order to prevent yet other military conflicts on the continent, involving again mainly Germany and its neighbours. To that end, an initial nucleus of six states (France, Italy, West Germany, Belgium, the Netherlands and Luxembourg) created an economic union which helped all of them rebuild their war-shattered economies and prosper. The victorious powers led by the United States forgave Germany most of its debts, opened up their markets to German-made goods and supplied the seed capital necessary (Marshall Plan).
For six decades the European Union grew, expanding southwards and eastwards, while the German economy became a powerhouse on the continent. In the wake of the fall of communism and the implosion of the USSR, West Germany had reunited with East Germany, and started to dominate not only the continent’s economy but also its political and – since the introduction of the euro- its monetary affairs.
The latter developments have unfortunately proved to be an unmitigated disaster for all its other EU partners. In truth, events over the last decade – the financial crisis, the sovereign debt crisis, austerity policies – have conclusively proved to many specialists that Germany, with a group of northern Protestant countries, has a vastly different set of economic responses and values, which are at odds with those prevalent in the southern part of the EU.
Thus, while Germans and their allies highly value a strong currency, low or zero inflation, low or zero budget deficits, a culture of thrift and the continuous reduction of public debt, countries like Italy, France and Spain – not to mention Greece, Portugal or Ireland – would prefer a significantly weaker euro, flexible budget deficit targets, higher inflation, the resorption of public debts through economic growth instead of austerity measures, and a massive reduction in the unemployment rates affecting them.
So far, Germany has succeeded in forcing all EU members to adopt its “six-pack” and “golden rule” and to maintain inflation close to zero. The outcome of these policies on the continent has translated into economic stagnation, social strife and a never-ending obsession with austerity and public debt reduction measures.
The current Greek crisis has merely highlighted the folly of such policies, as well as the unshaking determination of the German leadership to push the entire continent towards economic ruin. To avoid this, which could only lead to an USSR-type implosion of the Union, it would be more rational for Germany to leave it, reintroduce its beloved deutschemark and form an economic and political union of its own in the north of the continent. In other words, for the European Union to be saved from impending collapse, a “Dexit” option – and not “Grexit” – is what is currently needed. (Greece would not be able to threaten the survival of the EU the way Germany does.)
A Dexit should by no means be an acrimonious affair, or a disorderly one. Angela Merkel herself had alluded to the possibility of forming a Baltic Union as early as 2008. Starting with 2012, economists such as Alfred Steinherr, Anatole Kaletsky, Michael Mross, Aleš Michl, Kenneth Griffin, Anil Kashyap, Guillermo Nielsen, Ashoka Mody , Rolf Weder and Pedro Braz Teixeira have started recommending Dexit as the solution to the EU’s current economic and political predicament. The advantages of Dexit are clearly explained in a Time article from 2012:
“By contrast, if Germany were the one to leave, the euro would be the currency that falls in value, relative to Germany’s new national currency and also to the dollar. The weaker European countries would get to keep the euro but still get the devaluation they need, which would reduce their labor costs far less painfully than through wage cuts. In addition, the value of their outstanding debt would decline along with the value of the euro, and they would be more likely to be able to make payments on that debt and avoid defaulting.”
Viewed in this light, the third Greek bailout about to be concluded is rather of secondary importance. What is now needed is to start planning for an amiable and orderly Dexit, one which would benefit all EU member states. Failing to agree with the partition of the current Union into two entities – namely, an European Union centered around France and Italy and a Baltic one centered around Germany – could only result in a violent, USSR-type disintegration, accompanied by social strife, the revival of nationalism and xenophobia on our continent. Fortunately, such a partition will not lead to military conflict between the two sides further down the track, as NATO will still be there to prevent any such developments.
