Europe Faces Calamity

It would be instructive for everyone, especially Europeans, to look again at old photos of soldiers merrily marching off to World War I. Their smiles and confidence reflected the prevailing view that they should expect a short, glorious war. But very few of those smiling men would return in one piece, if they returned at all.

For Europeans in 1914, it was simply impossible to imagine the enormous scope of the death and upheaval that was coming. Fifteen million would die. The borders would be re-drawn. All the major empires, from London to Istanbul, would fall or be mortally wounded. And the resulting political trauma would usher in Nazism and Marxism-Leninism, and then an even bloodier second world war.

No, Europe is not facing anything like the destruction that awaited it in 1914. But the continent also does not seem to fully grasp what is coming down the road, or what to do about it. Each new bailout announcement from Brussels is greeted in the media as final salvation, after last month’s announcement of final salvation didn’t cut it (because the bailout wasn’t big enough).

If there is one thing you can take to the bank, it’s that bailouts cannot save the euro. It should be self-evident from the way the bailouts have ballooned from from 100 billion, to 440 billion, to 780 billion to 2 trillion Euros. There is no realistic amount of money, and no easily implementable plan that can save the euro in its present form. And each new, bigger rescue plan is simply doubling down on a bad bet, contributing to a final collapse that will be even more spectacular than before.

French Foreign Minister Alain Juppe told the French news magazine L’Express that Europe is facing an existential crisis that could lead to revolution and war. Today former German finance minister Peer Steinbrueck, warned that a collapse of the eurozone could reignite nationalism in Europe: "If the eurozone were to collapse, it could quickly lead to a political renationalization in Europe."

But these are like generals fighting the last war. The threat to Europe is not rising nationalism when the euro fails, but political collapse and extreme social chaos from economic devastation.

It was reported today that bank runs have begun in Greece. That’s what happens when monetary systems collapse. The rich flee, store shelves and bank vaults empty, and those unfortunate “have-nots” who are left are very, very unhappy. And what comes after that could indeed look like a replay of a very unpleasant period of European history.