News reports that Germany will allow Greece to default mark the beginning of the end for Europe as a political concept. As a cultural concept Europe had reached its best-used-by-date in 1914. The Cold War extended its political life, and now it is failing for general lack of interest. In twenty years, half of the citizens of southern Europe will be at retirement age, which guarantees national bankruptcy. The proportion of elderly dependents in the population will exceed 60% by 2050.
They might as well get it over with and go bankrupt now. Demographics, to be sure, are not the proximate cause of today's crisis. The Club Med countries gamed the Euro system to borrow cheaply and fund a corrupt welfare state. Nonetheless, incompetence in the short term calls attention to problems in the long term, and Europe's insoluble demographic problems loom large in the background.
Although Germany's political establishment maintains a reflexive loyalty to the European concept, the Germans do not want to pay taxes to support their feckless southern neighbors. Germany's export future lies in the east, not the south (or even the west), and the economic impact of a Euro crack-up on Germany probably is limited. Chancellor Angela Merkel has many virtues, but she misread the mood of her fellow citizens badly, and they have repaid her by trouncing her Christian Democratic Union in six state elections in a row.
The Greeks, like the Italians, seem to have taken the view that they might as well be bankrupted for a sheep as for a lamb, paralyzing their governments with strikes and protests against the austerity measures that might delay national bankruptcy. In Greece, even the tax collectors are on strike. So much of the country lives on political handouts that it is impossible to form a national consensus for austerity. The Germans have lost patience. When a corporation or individual can't manage, a bankruptcy judge takes over. When a country can't manage, it takes the coward's way out, namely devaluation, a random destruction of wealth with arbitrary redistribution of gains and losses among debtors and creditors. A return to the drachma and lira, and perhaps the peseta, is the likeliest outcome.
America can look upon Europe's misery with equanimity, if not Schadenfreude. The benefits of an integrated European economy have long since been transcended by the emergence of a global market; China and even Russia figure more importantly for German exports than Italy or Spain. The Eastern Europeans, where we have a residual security concern, will remain in the Northern European orbit, given their hard-wired economic links to Germany. Long term, Eastern Europe will diminish as an American concern along with its population, which has the lowest fertility of any part of the West.
The Europeans don't like us. Most of them think that US foreign policy in some way provoked 9/11, according to a 2007 poll. But that is no reason to rejoice in their misery. They are another civilization in decline. There but for the grace of God go we, and we should look to our own drift towards European-style welfare statism with redoubled concern as Europe fades away.