There is little need to report the results of the French and Greek elections or the response of world markets. Everyone was waiting to see how bad the reaction to the German-imposed austerity would be and how bad the reaction to its rejection would be. No one should have been surprised by Sarkozy's loss to the "socialist" Hollande and the near collapse of the Greek center or the market jitteriness that followed. The French and Greek results show the bankruptcy of the German policy of demanding that Europe overcome its debt crisis through wrist-slitting austerity. Many doubt the economic wisdom of this approach - seems counter-intuitive to me - because it does not address the need for growth. But beyond this, it could never have held against the absolutely predictable democratic reaction. The debt crisis was never just about finances but also about people and politics. The German government (and European Central Bank) may still support everyone else cutting budgets drastically so some can continue to benefit from a monopolistic Euro but political leaders elsewhere do so at their peril.
Germany was the big winner with the Euro. It essentially made its currency - the Deutschmark - into everyone's currency and its central bank into the same. This was supposed to enforce budgetary discipline and make everyone become like the Germans. But a currency does not make a nation and does not by itself transform a group of sovereign states into one policy-making entity. It certainly does not, by itself, translate into equitable growth across nations and classes. Inequalities, imbalances and differing national characters could not be contained through the magic of one set of bank notes and coins.
The only way to reconcile the popular reaction against politics that puts austerity above all other goals with the need to do something may well be cutting from Euro. This would allow a return to national currencies that can be inflated when necessary to spur growth. Yes, this does not by itself solve much either. Clearly we all - the US and Europe - must learn to live closer to our means. But it may only be a matter of time for Greece to fall out. Where would it stop? Spain, Italy, even France? It would stop where the market and democratic politics decide. Maybe it's just not possible to have one currency and one economic policy for an entire group of sovereign, democratic states.
