Monday, August 29, 2011

Is the cost of saving the euro beyond reach? (From April, but prescient)

Japan’s earthquake is sending shockwaves through Europe’s political structures, writes Jeremy Warner.

According to chaos theory, the flap of a butterfly’s wings in Brazil can set off a tornado in Texas. The Tohoku earthquake and tsunami in Japan can hardly be regarded as examples of “the butterfly effect”, where small events can have dramatic and unpredictable consequences; this was no small event. Yet as is ever more apparent, the fallout is being felt in startling ways far beyond the narrow confines of the Japanese economy.

One of its most bizarre effects has been to produce a landslide defeat for Angela Merkel’s Christian Democratic Union in regional German elections. Overnight, a poll that was largely about German unhappiness with support for the eurozone’s peripheral nations was transformed into a vote on the future of nuclear power. Fukushima eclipsed antipathy towards the bailouts. There were, of course, a number of very local issues involved, too, but it was basically Japan that determined the outcome. That, in turn, could have big consequences for the future of Europe, for although the parties that gained at the CDU’s expense all substantially share Mrs Merkel’s view that the euro must be saved, the chancellor’s room for manoeuvre – not just on nuclear, but on Europe and just about everything else – has been severely compromised. more