Europe's struggling with deep debt and low growth, but the heart of the continent's fiscal problems is a dysfunctional political system
Greek youths burn the European Union flag during a protest, in Athens (Yiorgos Karahalis/Reuters)
As fears mount that the debt crisis could spread to Italy and Spain, markets gyrate and European officials struggle to calm nerves. My colleague, Charles Kupchan, the CFR's Whitney Shepardson Fellow and a professor of international affairs at Georgetown University, offers his assessment.
The world is watching Europe's economic travails almost as closely as it watching America's. Although the focus is on debts and markets, it's the political mess that is most troubling. In Europe, as in the United States, political dysfunction and the difficulties of governance are the most worrisome story.
The European Union (EU) is the world's standard bearer when it comes to projects of regional integration. It has built a single market and introduced a single currency, opened national boundaries, and forged peace between former rivals. The success of the EU makes it a model for the Association of Southeast Asian Nations, the Gulf Cooperation Council, Mercosur, and just about every other effort at regional integration.
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Equally important, the EU remains America's main partner. Teamwork between the United States and Europe is essential to tackling most international challenges, including stabilizing Afghanistan, responding to the Arab Spring, righting the global economy, and promoting global health.
The ability of the EU to pull out of its tailspin depends on two related, but separate, issues. One is controlling the debt crisis and stabilizing the eurozone. The other is reversing the trend toward political fragmentation and renationalization.
Europe's debt crisis may be dominating headlines, but the EU's political fracturing is the real peril. On the economic front, Europe's leading members -- even if belatedly -- are likely to take the necessary steps to stabilize the eurozone. The stakes are simply too high for France and Germany to let the euro fail. The likely outcome in the long run is greater convergence on fiscal policy -- which the introduction of the euro should have entailed to begin with -- and debt instruments backed by the collective eurozone. Deeper integration on fiscal policy will ultimately strengthen the EU -- even if it means the consolidation of a multi-speed Europe and convinces members like Britain, which is determined to maintain its monetary and fiscal autonomy, to keep their distance from the common currency.