The financial crisis has given rise to several historical comparisons, not least the Great Depression. I would like to invoke another for the eurozone crisis – the 30 years war, which ravaged central Europe from 1618 to 1648.
Both the eurozone crisis and that terrible war occurred amid sudden power shifts; they were triggered by seemly trivial events; and they became incredibly complicated. They are also marked by sudden regional power shifts. Before 1618, the Holy Roman Empire was almost equally divided into Catholic and Protestant electorates. The truce ended when the balance of power shifted with the ascension in 1617 of the Catholic Ferdinand as king of Bohemia, who was one of the seven electors of the emperor. The actual war started a year later when rebels threw some of the king’s advisers out of a window. The famous defenestration of Prague triggered the first battles of a war between Protestants and Catholics, which went completely out of control. The war had four phases, and drew in outside nations – the Danes, the Swedes and, finally, the French.
The eurozone, too, has been subject to an internal power shift in the past five years, with the relative rise of German economic power. The eurozone crisis also had a comparatively trivial trigger, a fiscal meltdown of a small country at its outer perimeter. This too unleashed a wider economic conflict between a largely Protestant north and a Catholic/Orthodox south. When the eurozone’s modern rulers assembled in Brussels this month to sign the modern equivalent of a peace treaty, they were interrupted by the cross-current of a much older conflict – a UK-versus-the-rest dispute. So instead of one peace treaty, they ended up with two overlapping and interacting conflicts. Europe is once again getting absurdly complicated.
I do not wish go overboard with the parallels. The German regions lost between 20 and 45 per cent of the population between 1618 and 1648, as a direct and indirect consequence of the war. What is happening in the eurozone today is not war, nor likely to lead to one. And, no, I am not predicting that the crisis will last 30 years. It might, however, end in an economic devastation of a similar scale, especially if the German-imposed austerity policies are implemented everywhere and in full.
There are other obvious differences. Nobody is fighting over land any longer. One of the undoubted achievements of the European integration process has been the transformation of conflicts into theatrical late-night summit disputes that are so much at the heart of political life in Brussels. We have of course progressed.
But what remains unchanged from those times are the underlying cultural conflicts between Protestants and Catholics, north and south, Britain versus the Continent. The many decades of European integration have not ended this fundamental mistrust. This is also one the reasons why the Europeans have created such an irrationally unbalanced monetary union. Its rules were not the result of a rational economic argument, but designed to allay very old German suspicions.
I see the most disturbing parallels between the way the 30 years war has ended and the way Europe’s political leaders are setting about to resolve the current crisis. In 1648, the Spanish and the Dutch ended their bilateral 80-year war. The Netherlands became independent. In the subsequent peace treaties, the German Protestants regained their influence. In return, Bavaria and Brandenburg became independent states, the latter giving rise to the kingdom of Prussia half a century later. The Holy Roman Empire continued as an empty shell until it was formally dissolved some 150 years later. The war brought about the fragmentation of continental Europe, followed by 300 years of utter carnage.
The crisis management in the eurozone may also end in fragmentation. I see the three following scenarios as the most plausible outcomes: a political union with a joint debt instrument; the status quo enforced by eternal austerity; or a break-up.
No matter which is chosen, it may also lead to an unstable equilibrium. A political union would solve the narrow crisis, for sure, but may weaken democratic legitimacy, and may thus become unstable. German-imposed austerity is the solution most likely to trigger political extremism and violence. It is also inherently unstable because it imposes the economic doctrine of one country on another. A break-up of the eurozone will, at worst, destroy the European Union itself or, at best, return us to the situation of the early 1970s.
The treaty of Westphalia ended the 30 years war in 1648. It was the early modern period equivalent of what Herman Van Rompuy, the president of the European Council, would nowadays call a comprehensive resolution. Neither addresses the underlying conflicts. The 30 years war shows that we Europeans have been delaying making the necessary hard decisions for a long time.
Copyright The Financial Times Limited 2011.