Some foretelling about the Euro crisis.
Contrary to what you might have read in the media, the Euro crisis is just about to really start now. At least that's my personal opinion - for what it's worth.
In other words, the European Union was never in danger of failing due to a pure financial assault. First, we have the ECB which can print as much money as it wants, and second we have the ECB which, more than any other institution on earth, has an incentive to do whatever is necessary to sustain the Euro. In the short term this is enough.
But we are no longer in the short term. We are entering the long term, or if you will, we are just passing the prelude. In April and May, Greece and France will have elections. In 2013, Germany will have elections. These elections will, for the foreseeable future (which isn't very long), determine the future of the European Union.
The current strategy was to force Southern Europe into painful reforms which will undoubtedly be (mostly) good for their economies in the long run. But to enforce these reforms the countries are suffering dramatic economic - and social - hardship. This hardship must not continue for much longer for two reasons. First, the countries will start to elect erratically. That's what humans do if the pressure grows too high. Second, millions of unemployed, and especially youth unemployment, isn't just a transient thing. Unemployed people lose their qualifications. They will be ever less productive the longer they are unemployed - and a year is already too long. Moreover, economies have inertia. They don't suddenly start to grow just because the government is passing good laws. This often takes many years, sometimes a decade.
For these reasons Northern Europe, and especially Germany, need to stop the austerity-caused recession soon - even if the wages and prices in Southern Europe are still too high to be competitive on the global market. The rest of the wages have to be adjusted with the help of inflation (inflation must go up, the wages must grow much slower). This is not optimal but it is the best of all options.
Luckily this seems to be what is going to happen. All major opposition parties in Germany are in favor of more European solidarity than the current government. There is a reasonable chance that the opposition will win in 2013. The same is true for France in April/May; even though their socialist party is at times a bit strange, in my opinion. Anyway, they are going to win - it seems - and this will put a lot of pressure on Mrs. Merkel even before 2013.
Now, we just need to hope that the Greek vote responsibly. A Greek exit could cause problems for Portugal, which could, once again, bring forward the danger of a chain reaction in the financial markets. And even though the ECB would probably rather print money and distribute it with the helicopter than to stop existing, politicians in Northern Europe would respect its independence only for so and so long.
As for Germany and Mrs. Merkel. I respect her a lot. But I think she has fulfilled her historic mission and it would be good to see a new chancellor in 2013.
In any case, my prognosis for the coming two years is that it's going to get stormy; a lot more stormy than it has been in the past. I sincerely hope that the European Union does survive. Considering the rising powers like China, India, Brazil, among many others, and especially looking at the strange direction the US is taking I, more than in the past, appreciate the European societal model. But this model will not be able to persist if Europe, again, splits up into tiny, independent nation states.