Project Syndicate
December 31, 2012
Will the eurozone crisis end in 2013, or will it drag on throughout the year, and perhaps even deteriorate anew? This is likely to be not only the crucial question for the European Union’s further development, but also a key issue affecting the performance of the global economy.
While the EU clearly needs internal reforms, two external political factors are central to its prospects this year. The first is America’s self-imposed fiscal cliff, which, if not avoided, could throw the United States into recession, with massive repercussions for the world economy, and thus for Europe. Second, a hot war in the Persian Gulf, in which Israel and/or the US confronts Iran over its nuclear program, would result in a sharp rise in global energy prices.
Either scenario would greatly aggravate Europe’s crisis: soaring oil costs or another US recession would harm even the strong northern European economies, to say nothing of the already-depressed countries in Europe’s south. But, even then, the humanitarian consequences – especially in the case of another Middle East war – would most likely overshadow these scenarios’ impact on the European crisis.
CommentsIndeed, Europe’s crisis only seems to be economic or financial in nature; in reality, it is political to the core, for it has revealed that Europe lacks two things: a political framework – that is, more statehood – for its monetary union, and the vision and leadership to create it.
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