France’s Election

The nature of the euro crisis is altering. It will cease to be, for the time being, a financial crisis dominated by markets. It will become a political crisis dominated by voters.

At present the undemocratic reforms to economic management in the eurozone, the QE of sorts by the ECB and the dominance of Germany, have combined to calm financiers and the markets. A lot now depends on how the French and the Greeks vote.

If in Greece parties backing the plunge of the country into an economic ice age are rejected significantly, even if not thrown out altogether, the question will once again arise. Is it possible to ask a national population to suffer such privations to protect a currency? No national government, in even a ramshackle democracy, could survive such a prospect, were it in control of its economy.

Nothing underscores the loss of financial sovereignty to undemocratic EU institutions, dancing to Germany’s tune, than the political predicament in the debtor countries. Sooner or later voters will say no, or either the mobs or the military will take over. Economic repression is as bad in many ways, worse in some, as political repression.

The key is France. Sarkozy kicked, but said yes in the end, to keep up the appearance of the Franco-German project of the euro. If he wins, the centre of the euro will hold, even if countries drop off round the edges. If he loses, it will be a rejection of what has thus far been organised and German dominance will be challenged. The French people will want to go on spending, while the German people want to stop.

It is that confrontation of opposite aspirations and attitudes which, in the end, will decide whether the euro survives. If the Franco-German project finds the consensus for renewal, the euro will survive in modified form, probably with fewer members. If not, France will crash out and the euro will become the mighty deutschmark by another name.

Either way, Germany will end up as  the leading European power.

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