Euro Zone Breakup

The European Union struggles with the sovereign debts of several of its members and the specter of a Euro Zone breakup looms large. Those trading the Euro have been following the sovereign debt crisis as it plays out across the so called PIIGS nations, Portugal, Ireland, Italy, Greece, and Spain. Greece has been most in the news and now Italy. However, the story is not limited to the Southern tier nations of Europe plus Ireland. The resolution of this crisis depends largely upon two things, the willingness of solvent European Union members to help with a series of bailouts and the resolve of the EU to move forward towards a more economically and politically integrated community. Spreading the risk for payment of individual nation sovereign debt across the EU at large has been discussed as well as limiting the ability of local politicians to win votes by promising benefits that a nation cannot afford. Some feel that the path away from a Euro Zone breakup leads to a more thoroughly integrated European Union. In considering the price of a Euro Zone breakup the interested parties will do well to consider the alternatives.

The roots of the EU go back to 1951 and the Treaty of Paris which created the European Coal and Steel Community (ECSC). Founded six years after the end of the Second World War, the ECSC was considered a first step towards prevention of another devastating war in Europe by economically integrating the nations of Europe. Subsequent communities were the European Defense Community (EDC), European Atomic Energy Community (EURATOM), and European Political Community (EPC). After a series of high level conferences, the Treaty of Rome ushered in the European Economic Community in 1956. This agreement put former enemies from the Second World War into the same economic bed. Along the way it has always been easier for the EU to agree to economic arrangements than political ones as each nation has retained its sovereignty, individual laws, and local government with its own set of political issues. This last issue may be the most critical in preventing a Euro Zone breakup.

If the figures bandied about of over €2 Trillion needed to totally stabilize European debts are correct, solvent nations of the EU will need to incur more debt of their own or simply print money. These solutions would require fuller economic and political integration as the solvent members of the EU are not going to give away their hard earned assets. They will want a practical means of avoiding another debt crisis and a means of eventually being paid back in return for successive bailouts and avoidance of a Euro Zone breakup. At this point a bit of perspective is useful. The EU dates back to the dark days after World War Two. The nations of Western Europe relied on the US financed Marshall Plan to get back on their collective feet. The nations of Eastern Europe lived under the boot of the Soviet Army. The point of the fledgling economic integration brought about by the Treaty of Paris in 1951 was to prevent another war by tying the nations together for their mutual benefit. Sixty years later there has been no war among the EU members and, despite the current situation, the EU is an economy on par with that of North America. The several members of the EU will do well to remember WWI battles Flanders and Passiondale, Ypres and Chateau Thierry, and WWII with the partition of Poland, the Blitzkrieg across the Low Countries and France, Dunkirk, D Day and the battle for Normandy, the leveling of Hamburg with bombs, Stalingrad, the siege of Leningrad, the death camps and extermination of millions, and the tens of millions dead, injured and displaced by the idiocy of war. Then they must decide if the best course is a Euro Zone breakup or an interconnected union as seen by the visionaries who signed the Treaty of Paris in 1951.