Amid growing fears that the Greek debt crisis may engulf Spain, Portugal, Ireland, and even Italy, prominent voices in the European Union and elsewhere are positing an idea that just a few months ago would have seemed inconceivable: the European single currency is in danger of collapsing.
The minority view has always been skeptical about the wisdom of merging the economies and currencies of 16 European countries that have different languages, cultures, economic stages of development, and social practices. Up until just recently, however, the EU’s politically correct thought police had effectively silenced public debate about the “European project” by branding critics as anti-European traitors.
But European officialdom is now reeling from an outbreak of apostasy within its own ranks. The chief heretic is German Chancellor Angela Merkel, who in recent weeks has said publicly what many have been speculating about privately: “The euro is in danger. … If we don’t deal with this danger, then the consequences for us in Europe are incalculable,” Merkel recently told Germany’s Süddeutsche Zeitung. She repeated the warning in a speech to the German Bundestag: “The current crisis facing the euro is the biggest test Europe has faced in decades. It is an existential test and it must be overcome … if the euro fails, then Europe fails,” she said
Merkel’s fears have been echoed by European Central Bank President Jean-Claude Trichet, who told the German newsmagazine Der Spiegel that these are “dramatic times” for the euro and “the most difficult situation since the Second World War, perhaps even since the First World War.”
Meanwhile, French President Nicolas Sarkozy is said to have threatened to pull out of the euro altogether unless Merkel agreed to back the EU’s giant €750 billion bailout. The threat was reported by Spain’s El País newspaper, which attributed the information to Spanish Prime Minister José Luis Rodríguez Zapatero. El País reported that Sarkozy “banged his fist on the table and threatened to leave the euro, which obliged Angela Merkel to bend and reach an agreement.”
By publicly second-guessing the euro in such existential terms, European leaders have inadvertently drawn attention to many of the design flaws built into the single currency. This, in turn, has accelerated the euro’s depreciation in recent weeks and called into question its reliability as a reserve currency. The speed of the euro’s reversal of fortune is startling, especially considering that just a few years ago economists were predicting that the euro would challenge the U.S. dollar’s status as the world’s dominant international currency.
As the debate over the future of the euro gains momentum, the question arises: How would the collapse of Europe’s single currency affect the United States? The demise of the euro (which may or may not be imminent) would have both negative and positive consequences for America in two broad spheres, namely in economics and geopolitics.