In Insider's View of the Eurozone Crisis

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This article by the former German Financial Minister Joschka Fischer, provides a deeper understanding of the financial issues in Europe than anything that I have read so far. In Fischer's view there must be a difficult and lengthy process of moving towards a United States Of Europe. He does not think that the current organization of Europe is sufficient to deal with the issues that have been made apparent by the Greek crisis. A common currency cannot work without a common economic government. The US has a crisis in its member states that it has been able to deal with because in addition to a common currency the US has an economic governing body.

The primary beneficiaries of the eurozone are Germany and France. The common currency allows Germany to run its export economy, which comes 70% from Europe and 50% from eurozone member states. Without the common currency surplus states would see their currency appreciate relative to that of the states to which they export and exports would decline. France has an agricultural economy that also benefits from its exports within the eurozone. Germany and France have the most to lose if the eurozone folds, but it is not easy for them to work together because they have unique approaches to monetary policy.

Fischer views the current approach to Greece as an effort to bail out the banking system once again. Without intervention many of the banks would be insolvent because of the risky loans that were made. Instead of punishing Greece for not living up to its treaty obligations, the banks should bear the burden of responsibility. He also believes that pushing weak states like Greece out of the union would also be a security disaster for Europe.

In summary, the eurozone faces a choice of going backwards or forward towards greater integration. He does not believe that going backwards will work but he understands the obstacles that make going forward very difficult.