Splitting the euro
It is common knowledge that Ireland and the southern European eurozone countries have struggled with a strong euro. Tourism and exports have been particularly badly hit. Meanwhile, Germany and other northern European eurozone countries are actually benefitting from the euro’s value.
This is because the problems in peripheral Europe have prevented the euro strengthening much further. In times of economic stress and panic, money moves towards perceived safe haven currencies such as the Swiss franc and historically the Deutschmark. By sharing a common currency with the weaker peripheral economies within the eurozone Germany in particular has avoided the troubles afflicting the Swiss economy, caused by the ever-rising value of the Swiss franc.
A microcosm of the EU
There are a number of parallels between the problems facing the eurozone and Belgium. The strain felt in the relationship between Dutch-speakers in the north and French-speakers in the south of Belgium is not unlike the friction between certain northern European members of the eurozone and the ‘Greco/Latin’ bloc. At issue is the difficulty of aligning the interests of two very different linguistic and cultural groups into one cohesive entity. It is often said of the EU that a one-size-fits-all approach to economic management is never going to work with such disparate economies and cultures. This is the very same issue facing Belgium. It is unusual to find Germans buying French newspapers or watching French television programmes and vice versa. A similar phenomenon can be observed in Belgium, with French-speaking Walloons and Dutch-speaking Flemings sticking mainly to their own newspapers and television channels.
Quo vadis?
There is another interesting parallel between the current events playing out in Europe and the situation in the years immediately following the end of World War One.In 1917, economist John Maynard Keynes stated: “I work for a Government I despise for ends I think criminal.” When the Treaty of Versailles imposed very harsh reparation payments on Germany, he resigned from the British government in 1919 stating: “The policy of reducing Germany to servitude for a generation, of degrading the lives of millions of human beings...should be abhorrent and detestable..., even if it did not sow the decay of the whole civilised life of Europe.”
Almost a century later, it is northern Europe, led by Germany, which is imposing harsh economic conditions on southern European EU member states in general and Greece in particular. Keynes wrote prophetically: “If we aim deliberately at the impoverishment of Central Europe, vengeance .... will not limp. Nothing can .... delay for very long that final war between the forces of Reaction and the despairing convulsions of Revolution, before which the horrors of the late German war will fade into nothing.”
North-South divide
In the same way that the harsh conditions imposed on Germany after World War One sowed the seeds for World War Two, the current levels of austerity forced onto Greece could lead to a break-up of the European currency union. It’s not difficult to envisage a scenario whereby southern European members of the eurozone consolidate into a smaller unit, led by France, while a northern bloc, led by Germany, creates a separate currency union of stronger countries, a so-called Thaler currency bloc.
In this scenario, most people could guess which countries belong to which group with the possible exception of Belgium. Although Belgium is quite often seen from afar, rather like Switzerland as a francophone land, the reality is that the majority populations of both countries are linguistically and culturally Germanic rather than Latin, and the position is even more marked when looking at the contributions to economic output of the language communities.
So it is likely in this worst-case scenario that Belgium, at least in part, would gravitate towards the Thaler bloc. Of course, such a breakup of the eurozone is not in anyone’s interest so we should hope that EU politicians can put short-term national and electoral considerations aside and act decisively in the interest of the European Union as a whole.
