As the world financial crisis deepens, it is unlikely that it can be alleviated without carefully reviewing the infelicitous confluence of mistakes in Europe and the United States that has brought it to its present extreme state. The European Monetary Union, involving 17 countries, was based on a number of generally admirable premises, but also on a couple of false assumptions. All civilized people were grateful at the extension of European cooperation to this new level of intimacy, as ancient foes led by France and Germany reached an ever-closer community of national interest. For German chancellor Helmut Kohl, who did not trust Germany’s political instincts to cause his country to act responsibly when alone and not in the company of allies of less erratic recent history, an ever-closer union was an insurance policy of constructive peer-group thinking. He was sincere in espousing “a European Germany and not a German Europe.”
Greece, in particular, joined the euro, scrapping the ancient drachma, on a false prospectus prepared with the help of the ubiquitous, not to say adaptable, Goldman Sachs. Greece fluffed up its assets, finessed its liabilities, and leapt into the eurozone like a circus acrobat moving forcefully to a higher but stronger trapeze. In practice, the real backing of the euro was about three fifths a Deutschmark, one quarter a French franc, 5 percent a Dutch guilder, and the rest a potpourri of everyone else. (Britain has abstained and Switzerland is not a member.) Kohl and his officials presumably suspected that Greece and some of the others were over-egging the pudding a little, but were prepared to stand for it in the higher interests of a popular Germany girt about with grateful allies. Kohl had committed even greater resources to the same cause when he had paid a Deutschmark for every (essentially worthless) Ostmark issued by East Germany, at reunification. It brought inflation, resentment, and ingratitude, and contributed to the end of Kohl’s 14-year reign as chancellor (longer than Adenauer’s and surpassed only by the tenure of Bismarck). But it ended the ugly and dangerous division of Germany (and of Europe).
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