Floyd Norris considers Europe at an interesting tipping point: now that the bankers and their regulators have decided what must be done, voters may refuse to ratify the plans.

There is a risk over time that democracy will lead Europe to splinter. Germans are angry about having to pick up the bill for bailouts of other countries, which is one reason the German government felt called upon to insist on that “strict framework.” Others are resentful of the enforced austerity.

If European economies somehow grow enough, those resentments may not matter much. But if not, voter anger may intensify and demand that something change. Maybe the Germans will want to cut off their prodigal neighbors. Maybe the neighbors will decide they would be better off with a new currency and without overbearing demands for austerity that prevent recovery. In either case, populist politicians demanding the demise of the euro might win elections. The fact that European law does not allow for such a possibility would make the situation messier, but in the end voters would have their way.

Drop me a line at rjk@dailyblague.com
This entry was posted on Friday, April 15th, 2011 at 8:00 pm.