Game over. The euro as we know it is coming to an end. It is no longer clear whether we are talking about a proper monetary union or about a system of fixed exchange rates. This situation was to be anticipated. The different member countries no longer trust each other. It is impossible to build a monetary union when there are so many differences of opinion and so much divergence.
We knew already that the design for the euro was institutionally incomplete. The monetary union launched in 1999 lacked a banking, fiscal, and political union to back it up. But at the very least, we were all expecting the management of the euro crisis to be a bit more competent. It is a pity to realize that European politicians and technocrats have misunderstood the nature of the crisis and taken the wrong measures to overcome it. And thus we come to this bizarre situation in which a member country has established capital controls. It is unprecedented and tragic. The Greek fiasco reveals that the monetary union exists only in the imagination of European citizens, politicians and technocrats. Investors have a very different view.
The situation created by the Greek debacle is devastating to the hopes of so many people, especially the unemployed. Greece's population will suffer immensely because it finds itself between a rock and a hard place, namely, the monetary union and the demand for austerity measures. Rich Greeks, to be sure, have already taken their money out of the country, and will probably benefit from the fallout because they will bring into the country fresh money and purchase devalued assets once the fog dissipates.
This crisis is not purely the result of Greece's failure to improve its competitiveness and establish a minimally functional state with the ability to collect taxes. The crisis is also the result of Europe's failure to overcome its disagreements. We already had proof of this problem in the mishandling of the crisis in Ukraine and the pusillanimous attempts to address the human drama of immigration from Africa, which has already claimed so many lives. Europe does not really exist as an entity, only as a collection of mutually suspicious states. If it exists, it does not appear to have the ability to make decisions and tackle problems.
Austerity policies lie at the heart of the problem. Germany's intransigence about balanced budgets is actually counterproductive. In a tightly integrated trade bloc, if every country pursues austerity, there is no slack demand to stimulate growth. Germany and the other surplus economies should serve as the locomotives through public, and especially, private spending.
Europe is at the mercy of forces spinning out of control. The growth of emerging economies, an aging population, right and left extremism, and political corruption are threatening its future. Left-wing populism is right now the most immediate challenge because it has the potential of destroying the European project, as the case of Greece demonstrates. Europeans in other countries should take good notice before casting their vote at the next election.
What will happen next? The unemployed face years of suffering. There will be more European summits, and more commitments that nobody will fulfill. The Greek problem may be fixed in the short run, but at the expense of a long-term solution. The Eurozone needs to be founded a second time, including only the countries that have the institutions and the desire to be part of a true monetary union. The countries that are not committed to investing in the future and regaining their competitiveness would be better off with a currency of their own.
This post originally appeared on HuffPost Spain and was translated into English.