The Romney campaign has come in for a fair amount of criticism in the past week or so. Most of this is fairly typical summer doldrums stuff, but some of it has to do with Romney's foreign-policy musings -- or lack thereof. On this issue in particular, William Kristol, Gerry Seib, Fred Kaplan, and, er, your humble blogger have been pillorying the campaign for a near-complete lack of substance.
According to Politico's Maggie Haberman and Jonathan Martin, the Romney campaign seems to have been listening:
Mitt Romney’s campaign is considering a major foreign policy offensive at the end of the month that would take him to five countries over three continents and mark his first move away from a campaign message devoted almost singularly to criticizing President Barack Obama’s handling of the economy, sources tell POLITICO.
The tentative plan being discussed internally would have Romney begin his roll-out with a news-making address at the VFW convention later this month in Reno, Nev. The presumptive GOP nominee then is slated to travel to London for the start of the Olympics and to give a speech in Great Britain on U.S. foreign policy.
Romney next would fly to Israel for a series of meetings and appearances with key Israeli and Palestinian officials. Then, under the plan being considered, he would return to Europe for a stop in Germany and a public address in Poland, a steadfast American ally during the Bush years and a country that shares Romney’s wariness toward Russia. Romney officials had considered a stop in Afghanistan on the journey, but that’s now unlikely.
Sources stressed that the trip was still being planned but will be finalized internally this week, and some of the details are subject to change. While Romney is likely to lash Obama in his VFW speech, he’s expected to restrain his remarks about the president when speaking abroad.
Huh. Now, obviously, I can't comment on the content of any of these speeches. Still, the country selections are themselves revealing, as Burns & Haberman elaborate on in their Politico story. How do those choices stack up? Laura Rozen was a bit skeptical, tweeting that "his reported itinerary only seems 25 yrs out of date." Kristol responded in the Politico story by urging Romney to go to Afghanistan.
My initial response falls more into the Larry David camp on this one. The goal of a trip like this is twofold: to try to demonstrate some kind of foreign-policy gravitas, and to draw a distinction between one's foreign-policy views and that of the opponents. The second part is really tricky to do overseas, because one of the few norms of comity left in Washington is that public officials aren't supposed to criticize a sitting president's foreign policy in foreign lands. Romney can finesse this by going to countries where he thinks he can foster a stronger bilateral relationship, in contrast to Obama (it would be more awkward for him to go to countries where he thinks the U.S. should be less friendly, so I think we can rule out stops in Moscow and Beijing).
By that standard, this is a decent list. The stops in Israel and Poland highlight the frictions the Obama administration's rebalancing and reset strategies have created in the Middle East and Eastern Europe. Going to Germany allows Romney to ding Obama on economic policy, as Romney is clearly more sympatico with Angela Merkel's austerity strategy.
If I were planning the itinerary, however, I'd suggest two additional stops. First, India. That's another country where bilateral relations have cooled off a bit during the Obama years. It's also one of the BRIC economies, which would allow Romney to disprove Laura Rozen's charge of being out-of-touch with current geopolitical realities. Second, Seoul. This would allow Romney to blast North Korea with invective while talking about his vision for the Pacific Rim.
What do you think? Where would you have Romney go visit?
Yesterday, in commenting on the eurozone crisis, Barack Obama said the two words all political scientists hate to see:
"Europe is wealthy enough that there's no reason why they can't solve this problem," Obama told reporters at the White House.
"If they muster the political will, they have the capacity to settle markets down, make sure that they are acting responsibly and that governments like Italy are able to finance their debt." (emphasis added)
By and large, political scientists hate the concept of political will. As I've said numerous times on the blog, "political will" is usually tantamount to saying, "if only politicians would completely ignore short-term political incentives and do the right thing!" Or, to put a finer point on it, "if only politicians stopped acting like politicians!" Because we as a profession tend to focus on structural forces and immutable preferences, "leadership" as a variable often (though not always) falls by the wayside.
Looking at the latest EU summit/eurozone machinations, however, I'm beginning to wonder if we need to think about "first image" explanations for what just happened. As the Wall Street Journal, Felix Salmon, Financial Times, Paul Krugman, and Economist are all reporting, it was pretty friggin' disastrous. Salmon provides the most complete autopsy -- here's a snippet:
[A]nother half-baked solution is exactly what we got. Which means, I fear, that it is now, officially, too late to save the Eur ozone: the collapse of the entire edifice is now not a matter of if but rather of when.
For one thing, fracture is being built into today’s deal: rather than find something acceptable to all 27 members of the European Union, the deal being done is getting negotiated only between the 17 members of the Euro zone. Where does that leave EU members like Britain which don’t use the euro? Out in the cold, with no leverage. If the UK doesn’t want to help save the euro — and, by all accounts, it doesn’t — then that in and of itself makes the task much more difficult.
But that’s just the beginning of the failures we’re seeing from European leaders right now. It seems that German chancellor Angela Merkel is insisting on a fully-fledged treaty change — something there simply isn’t time for, and which the electorates of nearly all European countries would dismiss out of hand. Europe, whatever its other faults, is still a democracy, and it’s clear that any deal is going to be hugely unpopular among most of Europe’s population. There’s simply no chance that a new treaty will get the unanimous ratification it needs, and in the mean time the EU’s crisis-management tools are just not up to dealing with the magnitude of the current crisis.
The fundamental problem is that there isn’t enough money to go around. The current bailout fund, the European Financial Stability Facility, is barely big enough to cope with Greece; it doesn’t have a chance of being able to bail out a big economy like Italy or Spain. So it needs to beef up: it needs to be able to borrow money from the one entity which is actually capable of printing money, the European Central Bank.
But the ECB’s president, Mario Draghi, has made it clear that’s not going to happen. Draghi is nominally Italian but in reality one of the stateless European technocratic elite: a former vice chairman and managing director of Goldman Sachs, he’s perfectly comfortable delivering Italy the bad news that he’s not going to lend her the money she needs. He’s very reluctant to lend it directly, he won’t lend it to the EFSF, and he won’t lend it to the IMF. Draghi has his instructions, and he’s sticking to them — even if doing so means the end of the euro zone as we know it.
So, what explains this mess -- the inexorable structural problems of the European Union, or the lack of political leadership? At this point, I'm genuinely uncertain. For example, the facile explanation for British Prime Minister David Cameron's rejection of an EU treaty is catering to his domestic interests -- namely the British financial sector. Then, however, we get to this bit from the Economist:
After much studied vagueness on his part about Britain's objectives, Mr Cameron's demand came down to a protocol that would ensure Britain would be given a veto on financial-services regulation (see PDF copy here. The British government has become convinced that the European Commission, usually a bastion of liberalism in Europe, has been issuing regulations hostile to the City of London under the influence of its French single-market commissioner, Michel Barnier. And yet strangely, given the accusation that Brussels was taking aim at the heart of the British economy, almost all of the new rules issued so far have been passed with British approval (albeit after much bitter backroom fighting). Tactically, too, it seemed odd to make a stand in defence of the financiers that politicians, both in Britain and across the rest of European, prefer to denounce....
Britain may assume it will benefit from extra business for the City, should the euro zone ever pass a financial-transaction tax. But what if the new club starts imposing financial regulations among the 17 euro-zone members, or the 23 members of the euro-plus pact? That could begin to force euro-denominated transactions into the euro zone, say Paris or Frankfurt. Britain would, surely, have had more influence had the countries of the euro zone remained under an EU-wide system.
As for Merkel, well, my take on her leadership style has been documented already. She's dealing with an opposition that is castigating her for not taking swifter and more drastic action to resolve the eurocrisis. In response, she's pushing for changes that will take months, if ever, to accomplish -- and, if they are accomplished, have no guarantee of actually solving the problem. It doesn't seem like the eurozone has that time.
As for Draghi, well, one could attribute his range of half-hearted measures to his excessively cautious leadership -- after all the ECB is an ostensibly independent institution, so presumably Dragh has the greatest amount of autonomy. It's not that simple, however -- Draghi wouldn't have been selected as the new ECB head unless he demonstrated the kind of policy traits that made him acceptable to Germany in the first place. Oddly enough, although Draghi currently has the most freedom of action, the structures that ensured he would become the new ECB head ensured he would be the least likely person to exploit that freedom.
So, stepping back, there appears to be a role for the quality of political leadership as an explanatory factor for the current eurozone crisis. Properly defining that role, however, is beyond the capacity of this blog post.
What do you think?
Hey, remember when about ten days ago I blogged that things were getting so bad in Europe that it was legitimate to bring up the 1930's? What's happened since that seemingly hyperbolic warning?
As Felix Salmon blogged earlier this week, the European banking system is headed towards a full-blown liquidity crisis. Yields on Spanish and Italian debt are hovering around the 7% mark, which was the tipping point that forced Greece, Ireland and Portugal to seek assistance from the European Financial Stability Facility and the IMF. Multiple European countries, including France, have had difficulty completing bond auctions this week.
So it would seem that the European Central Bank needs to do something. The New York Times, Wall Street Journal, and Financial Times all have lead stories today pointing out the enormous pressures that are being put on the European Central Bank this week. We'll excerpt the non-gated NYT story to set things up:
Only the fiercely conservative stewards of the European Central Bank have the firepower to intervene aggressively in the markets with essentially unlimited resources. But the bank itself, and its most important member state, Germany, have steadfastly resisted letting it take up the mantle of lender of last resort....
At issue is whether the bank has the will — or the legal foundation — to become a European version of the Federal Reserve in the United States, with a license to print money in whatever quantity it considers necessary to ensure the smooth functioning of markets and, if needed, to essentially bail out countries that are members of the euro zone.
Traditionally, and according to its charter, the European bank has viewed its role in much narrower terms, as a guardian of the value of the euro with a mission to prevent inflation. But as market unease has spread over the past two years, critics say the bank’s obsession with what they say is a phantom threat of inflation has stifled growth and helped bring the euro zone to the edge of a financial precipice.
With events threatening to spin out of control, the burden now rests on Mario Draghi, an inflation fighter in the president’s job at the bank barely two weeks who surprised many economists by immediately cutting interest rates a quarter point.
This morning, however, in his first speech as the head of the ECB, Draghi pivoted and redirected the pressure back at the politicial stewards of the EU:
National economic policies are equally responsible for restoring and maintaining financial stability. Solid public finances and structural reforms – which lay the basis for competitiveness, sustainable growth and job creation – are two of the essential elements.
But in the euro area there is a third essential element for financial stability and that must be rooted in a much more robust economic governance of the union going forward. In the first place now, it implies the urgent implementation of the European Council and Summit decisions. We are more than one and a half years after the summit that launched the EFSF as part of a financial support package amounting to 750 billion euros or one trillion dollars; we are four months after the summit that decided to make the full EFSF guarantee volume available; and we are four weeks after the summit that agreed on leveraging of the resources by a factor of up to four or five and that declared the EFSF would be fully operational and that all its tools will be used in an effective way to ensure financial stability in the euro area. Where is the implementation of these long-standing decisions?
The truly scary thing is that, given the state of the Italian and Spanish bond markets, even the full EFSF won't be enough to calm markets down.
And so the pressure gets redirected back to Germany, as the most powerful actor in the ECB and EU. As Matthias Matthijs and Mark Blyth explain in Foreign Affairs, however, Germany has not been reading its Charles Kindleberger:
In order to guarantee the strength of any international economic system, Kindleberger explained, a stabilizer -- only one stabilizer -- needs to provide five public goods: a market for distress goods (goods that cannot find a buyer), countercyclical long-term lending, stable exchange rates, macroeconomic policy coordination, and real lending of last resort during financial crises. The United States did not supply these things in the 1930s. Germany fails the test on all five items today.
First, rather than providing peripheral countries with a market for their distress goods, the Germans have been enthusiastically selling their manufactured goods to the periphery. According to Eurostat, Germany's trade surplus with the rest of the EU grew from 46.4 billion euro in 2000 to 126.5 billion in 2007. The evolution of Germany's bilateral trade surpluses with the Mediterranean countries is especially revealing. Between 2000 and 2007, Greece's annual trade deficit with Germany grew from 3 billion euro to 5.5 billion, Italy's doubled, from 9.6 billion to 19.6 billion, Spain's almost tripled, from 11 billion to 27.2 billion, and Portugal's quadrupled, from 1 billion to 4.2 billion. Between 2001 and 2009, moreover, Germany saw its final total consumption fall from 78.5 percent of GDP to 74.5 percent. Its gross savings rate increased from less than 19 percent of GDP to almost 26 percent over the same period.
Second, instead of countercyclical lending, German lending to the eurozone has been pro-cyclical. Indirectly (through buying bonds) and directly (by spreading its exchange rate through the euro), the country has basically given the periphery the money to buy its goods. During the economic boom of 2003-2008, Germany extended credit on a massive scale to the eurozone's Mediterranean countries. Frankfurt did quite well for itself. "European Financial Linkages," a recent IMF working paper, reveals that in 2008, Germany was one of the two biggest net creditors within the eurozone (after France). Its positive positions were exact mirrors of Portugal, Greece, Italy, and Spain's negative ones. Of course, as the financial crisis began to escalate in 2009, Germany abruptly closed its wallet. Now Europe's periphery needs long-term loans more than ever, but Germany's enthusiasm for extending credit seems to have collapsed.
And what about the third public good, stable exchange rates? By definition, the euro gives the countries that choose to join it a common external float, the credibility that comes with banking in a potential global reserve asset, and the credit rating of its strongest member. This is both true and where the problems begin. At the core of the eurozone lies a belief that, if countries adhere to a set of rules about how much debt, deficit, and inflation they can have, their economies will converge, and the same exchange rate will work for all members. This is true in theory, but only so long as countries obey the rules. And, despite being the author of many of those rules, Germany showed a singular lack of leadership and responsibility when it came to following them. When it broke the Stability and Growth Pact (SGP) in 2003, it sent the signal to the smaller countries that fiscal profligacy would go unpunished. The result was heightened public sector borrowing and increased public spending. Germany's enthusiastic lending to the periphery only exacerbated the problem.
Fourth, economic health requires the stabilizer to coordinate macroeconomic policy within the system. In this domain, Germany failed spectacularly, by insisting that the rest of the world follow its peculiar ordoliberal economic philosophy of export-oriented growth. By ignoring long-established ideas such as the Keynesian "paradox of thrift" or the "fallacy of composition," Germany is advocating a serious dose of austerity in the European periphery without even a hint of offsetting those negative economic effects with stimulus or inflationary policies at home. German growth, after all, was partially fueled by demand in Southern Europe (made possible by excess German savings). By the iron logic of the balance of payments, one country's exports are another country's imports and one country's capital inflows are another's capital outflows. So, the eurozone as a whole cannot become more like Germany. Germany could only be like Germany because the others countries were not. Insisting on ordoliberal convergence is guaranteed to produce economic instability, not stability.
Finally, Kindleberger would want Germany -- or, rather, the ECB, which is dominated by Germany -- to act as a lender of last resort by providing liquidity during the current crisis. Germany instead insisted on IMF conditionality for the bailout countries and on severe fiscal austerity measures in exchange for limited liquidity, thus failing Kindleberger's final test. The most obvious example is German obstinacy against letting the ECB play the role that the Federal Reserve played in the United States in 2008 and 2009. By lending heavily, the Fed was able to arrest the United States' slide into despair. Only a couple of days ago, Jens Weidmann, the president of Germany's powerful Bundesbank, flat-out rejected the idea of using the ECB as "lender of last resort" for governments, warning that such steps "would add to instability by violating European law." It is hard to see how yet one more violation of European code will add significantly to the already horrendous levels of instability, when brushing democracy aside is considered good for the euro.
It looks as if there's a plan in the works for the ECB to do a legal end-around by loaning money to the IMF and then having the Fund loan to the GIIPS economies. If that happens, however, it won't be announced until next month. And the way credit markets are playing out right now, I'm not sure the eurozone has that much time.
Now is usually the point in the post at which the instinct to provide some sweeping narrative about the state of the eurozone -- a la David Brooks -- is very compelling. What's the point, however? The eurozone is in contagion mode right now, which means it doesn't matter which countries were virtuous and which countries weren't during the last decade of binge borrowing. They're all on the same sinking ship, and the Merkel Algorithm seems to be playing out again.
Developing.... in a way that truly scares the living crap out of me.
[NOTE: The following is a public service message from the hard-working team at FP Magazine to the policy wonks and market analysts inside the Beltway--ed.]
Has this happened to you in 2011? You're stressed out from a long day of reading/writing/number crunching/contingency planning and you're looking to unwind and enjoy yourself. Then you see the latest announcement of a European summit meeting and proclamations of a breakthrough deal that will resolve the plight of the Greek economy, the fragile state of European banks, and the perilous credit rating of southern Mediterranean countries.
As you see stocks rise, credit markets soar, and the euro appreciate, the euro-optimism becomes intoxicating. Pretty soon, the euro-giddiness starts to get to you. You start to tweet things like, "the corner has been turned," post on Facebook that, "it's time to Europarty!!" and talk up the metric system again. Nicolas Sarkozy looks like the brilliant progenitor of grand ideas and grand summits, and Angela Merkel is the shrewd politician who made the bankers blink.
After a few hours or so of this, all the problems in the world look eminently solvable. In your head, you've devised brilliant, intricate plans that solve the Israeli/Palestinian peace process, the India/Pakistan enduring rivalry, and the BCS college football rankings. Before you know it, you've organized and presented a talk in which you provide the Mother of All Powerpoint Presentations to Solving Global Problems, charging the entire, catered affair to the Brookings Institution.
Beware!! You are a victim of Eurogoggles. As the Economist will observe, "in the light of day, the holes in the rescue plan are plain to see." Both AFP and Bloomberg will point out that the policy euphoria has faded the next day. It will turn out that details are left unexplained. The size of the bailout package, which looked massive the night before, will prove to be a limp, unsatisfying half-measure the next day. The bank rescue fund and the Greek deal remain incomplete. All you'll be left with is that vague sense of self-loathing at having been suckered again, and a strem of angry voice-mail messages from a DC think tank. The walk of shame to your water-cooler the next day, in which co-workers mock your tweets of the night before, will be humiliating.
Eurogoggles -- don't let it happen to you or your colleagues.
[NOTE: the following reads much better if you read it using the voice of Rod Serling!--ed.]
There's a subtle art to reading broadsheet American journalism. Reporters strain for objectivity, and in the process, strain to avoid anything that smacks of the prejorative. If you squint real hard at the text, however, you can occasionally detect moments when the reporter is dying, just dying, to state their blunt opinion on the matter at hand.
I bring this up because Liz Alderman of the New York Times, in her story on the possibility of a big deal in Europe to enlarge the European Financial Stability Facility, appears to be ever-so-subtly banging her head against her keyboard:
The rally in American stock markets was set off by a report late Tuesday on the Web site of The Guardian, a British newspaper, that France and Germany had agreed to increase the size of the rescue fund — the European Financial Stability Facility — to as much as 2 trillion euros to contain the crisis and backstop Europe’s banks. But almost as soon as those hopes soared, European officials quickly brought them back to earth, with denials flooding forth from Brussels, Paris and Berlin.
This latest round of rumors and rebuttals about a European solution was a repeat of earlier situations. Such episodes have played out several times since the debt crisis intensified this year. Most recently, investors have been pegging hopes on a meeting of Europe’s leaders set for this coming Sunday in Brussels, anticipating that a comprehensive solution to the debt crisis might be unveiled (emphasis added).
It would appear that Ms. Alderman has discovered that there is a fifth dimension of reporting, beyond that which is known to ordinary economic journalism. It is a dimension as vast as developed country sovereign debt and as timeless as currency itself. It is the middle ground between austerity and stimulus, between national sovereignty and supranational authority, and it lies between the pit of man's fears and the summit of his knowledge. This is the dimension of European political economy. It is an area which we call... the eurozone.
Germany's move—marking a contrast with the U.S. and other countries that have largely stuck to plans to continue pursuing nuclear power—is a U-turn from a contentious plan that Ms. Merkel engineered just last fall that would have extended the lifetimes of some of Germany's reactors into the 2030s, more than a decade longer than previously scheduled. Ms. Merkel's latest move is effectively a return to an agreement to phase out nuclear power approved in 2002 by a center-left Social Democrat-Green coalition....
In few countries is nuclear energy the hot-button issue it is in Germany, where polls show some 70% of the populace opposes it, the legacy of a broad-based antinuclear movement that harks back to the 1986 Chernobyl accident. Since the Fukushima accident, antinuclear protests have taken place across the country.
Ms. Merkel's change in course, though, hasn't produced the desired political effect. Conservative allies have been frustrated by her turn away from a cherished policy victory, and nuclear opponents have seen the move as opportunistic. Those perceptions contributed to several stinging regional election losses for the Christian Democratic Union this spring, and have led to a surge in clout for the opposition Green Party.
And now the NYT:
For Mrs. Merkel, the embrace of clean energy represents a transformation based on the politics of the ballot box. Just last year, her center-right coalition forced through an unpopular plan to extend the life of nuclear power plants, with the last to close in 2036. That action inflamed public opinion but the Fukushima disaster politicized it. The nuclear crisis is widely believed to have caused Mrs. Merkel’s party to lose control of the German state of Baden-Württemberg for the first time in 58 years, in a March election that became a referendum on energy policy.
By Monday, Mrs. Merkel said the country must “not let go the chance” to end its dependence on nuclear power.
And, finally, Reuters:
The German chancellor has, in nine months, gone from touting nuclear plants as a safe "bridge" to renewable energy and extending their lifespan to pushing a nuclear exit strategy that rivals the ambitions of the Social Democrats and Greens.
Merkel had her atomic epiphany after the Fukushima disaster in Japan in March, announcing a moratorium on nuclear power and launching an urgent overhaul of German energy policy, resulting in the exit strategy announced on Monday.
Her change of heart, however genuine as it may be, coincides with a string of disastrous election results for her Christian Democrats (CDU) and their Free Democrat (FDP) allies that have been partly blamed on her unpopular pro-nuclear policy so far.
With the FDP losing popularity almost as fast as the Greens gain it, and the Greens unseating the CDU in their heartland of Baden-Wuerttemberg in March as well as outpolling them for the first time in Germany in Bremen this month, Merkel has upgraded the nuclear moratorium to a rush for the exit.
Watching Merkel's performance during the myriad euro crises of the past two years, I'm beginning o detect a decision-making algorithm at work. Let's call it The Merkel Algorithm. It consists of the following steps:
1) A problem festers;
2) Dither and do nothing;
3) Public opinion polls drop;
4) Let things fester some more;
5) Lose an electioon somewhere;
6) Announce new policy that reverses prior position
7) Lose even more political support.
Merkel appears to have brilliantly executed this strategy on both the eurozone and nuclear power. In all seriousness, what I don't understand is the long periods of dithering and festering. I get that politicians will sometimes be wrong-footed on policy shocks. Merkel, however, really does seem to wait until the worst, most cravenly political moment to do something. Why?
Your humble blogger hereby calls on all Germany-watchers to offer either an explanation or a more nuanced take on the Merkel Algorithm -- because your humble blogger is good and truly flummoxed.
Europe's debt crisis is not going away anytime soon, which means that the crisis over European monetary union won't be going away either. As it turns out, the European Commission is on this, proposing things like "excessive deficit procedures" and the like.
Will this work? Well … let's go to the Economist's explanation for why the previous set of rules failed to prevent this from happening:
The “stability and growth pact” was supposed to limit each country’s budget deficit to 3% of gdp and public debt to 60% of GDP. It failed, in part because France and Germany refused to abide by it -- and even rewrote the rules when they breached the deficit limit.
In contrast, the problems that arose because different economies responded differently to the zone’s common monetary policy were underestimated. The sudden drop in real interest rates on joining the euro in Greece, Ireland and Spain fuelled huge spending booms. (Portugal had enjoyed its growth spurt in the late 1990s in anticipation of euro membership.) Rampant domestic demand pushed up unit-wage costs relative to those in the rest of the euro area, notably in Germany, hurting export competitiveness and producing big current-account deficits.
The euro allowed these internal imbalances to grow unchecked and now stands in the way of a speedy adjustment, because euro-area countries whose wages are out of whack with their peers’ cannot devalue.
So, what is to be done? In the past, European integrationists have been quite adroit at using periods of crisis and malaise to jumpstart further integration efforts. It's possible that this could happen again.
In this case, however, integration efforts are going to be very costly. The Economist explains:
[T]here are three ways for a country to restore competitiveness: devaluation (which reduces wages relative to those in other exporting countries), wage cuts or higher productivity. In the euro area, the first option is out. The other two rely on easing job-market rules so that pay matches workers’ efficiency more closely, and workers can move freely from dying industries and firms to growing ones.
I'm thinking unions will
develop breakout nuclear capabilities aren't going to be big fans of that second option. The third option seems like the ultimate political dream, except it involves eliminating regulations that likely benefit a lot of entrenched interest groups.
Another possibility is greater fiscal centralization. The Economist is not keen on this, but that's besides the point -- as Mary Sarotte points out at Foreign Affairs, there's a Very Important Country that's not going to go along with the move:
The challenge now is governance reform, not expulsion of member states. Reverting to national currencies would drive the values of reissued southern currencies into the ground and the deutsche mark into the sky, thereby undermining Germany's export competitiveness and job market, to say nothing of the collateral damage to the European Union and the single market. The eurozone crisis should not signal the end of the euro but rather the start of a long-overdue overhaul. The idea of a European Monetary Fund, endorsed by Wolfgang Schäuble (an elder statesman from the days of German unification and now a subordinate of Merkel), faded after Merkel dismissed it but deserves broader support. Germany also needs to reconsider its calls for painful fiscal discipline on the part of the weakest countries until their economies regain footing. Ideally, but perhaps not realistically, Merkel should return to previous German form and spearhead a revision of the Maastricht Treaty, leading a fresh effort to do for political union what Kohl and Mitterrand did for monetary union.
The unlikelihood of such a move exemplifies a fundamental problem within the whole European Union: there exists a built-in tension between the lofty goals of integration and member states' collective unpreparedness to think through the consequences of their ambitious project. The great achievement of the past has been to reconcile these contradictory impulses by focusing on practical agreements. It is time to do so once again and realize that the necessary consequence of monetary union is greater political union.
In some ways, what happens from here on out will be an excellent test of whether economic interdependence really alters national incentives. As I blogged a few months ago, "When going backwards isn't an option, and muddling through is no longer viable, the only thing left to do is move further along the integration project."
Of course, the European have spent the past few months muddling through some more. Given current trends, however, that option is going to disappear sooner rather than later.
Daniel W. Drezner is professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University.