Imagine the United States not as a single, unified entity consisting of a common people but as a loose association of 50 separate states, with 50 separate histories, 50 different languages and 50 unique cultures. And then imagine that a major crisis challenges the very foundation of this union, and any serious action requires the approval of all 50 states.
How confident would you be that, without significant structural reforms, the union would last?
This is roughly equivalent to the challenge the Eurozone faces today. Without strong leadership, the future of the euro - and the European project - is in jeopardy. Thankfully, there is a historical example from which the Europeans can learn.
Before the United States had a Constitution, it was governed by a toothless document called the Articles of Confederation. The central government formed under this agreement was incredibly weak, and major decisions had to be ratified by all 13 states. Lacking the power to tax or govern effectively, the Articles were exposed as insufficient. Something had to be done.
In 1787, an historic convention convened in Philadelphia. After months of deliberation, the delegates created a strong federal government under the auspices of the new U.S. Constitution. It was so expertly crafted that it is still in use to this day.
Just like America’s pre-Constitution days, the Eurozone is in a bind. Major decisions require approval from all 17 nations. Finding common ground (and making “European” decisions) is often difficult and unpopular domestically. The current debt crisis has made it abundantly clear that the structure of the European Union is such that it is not a reliable source of decisive leadership.
Thus, the EU faces a choice: It must either strengthen the central governing institutions in Brussels and Frankfurt or face the prospect of the entire European project unraveling. In short, this is Europe's Articles of Confederation moment.
This is a decision of tremendous global significance. While the first financial crisis of 2007-08 was largely America's making, the current one is largely Europe's. A failure to reach agreement in how to deal with Greece and the other struggling peripheral economies could cause a radical shift in the membership of the Eurozone. This alone could throw the world back into recession - if it is not headed there already.
The European Union was formed precisely for the reason of preventing this sort of catastrophe. Francois Mitterand and Helmut Kohl - the architects of the European Union - believed that political and economic unification would stabilize the future of Europe. After much success, however, cracks are starting to appear in the Union.
