A Process of Disintegration
With Germany’s reunification, the main impetus behind the integration process was removed, the financial crisis unleashed a process of disintegration. The decisive moment came after Lehman Brothers collapsed, and authorities had to guarantee that no other systemically important financial institution would be allowed to fail. German Chancellor Angela Merkel insisted that there should be no joint EU guarantee; each country would have to take care of its own institutions. That was the root cause of today’s euro crisis.
The financial crisis forced sovereign states to substitute their own credit for the credit that had collapsed, and in Europe each state had to do so on its own, calling into question the creditworthiness of European government bonds. Risk premiums widened, and the eurozone was divided into creditor and debtor countries. Germany had changed course 180 degrees from the main driver of integration to the main opponent of a “transfer union.”
This created a two-speed Europe, with debtor countries sinking under the weight of their liabilities, and surplus countries forging ahead. As the largest creditor, Germany could dictate the terms of assistance, which were punitive and pushed debtor countries towards insolvency. Meanwhile, Germany benefited from the euro crisis, which depressed the exchange rate and boosted its competitiveness further.
As integration has turned into disintegration, the role of the European political establishment has also reversed, from spearheading further unification to defending the status quo. As a result, anyone who considers the status quo undesirable, unacceptable, or unsustainable has had to take an anti-European stance. And, as heavily indebted countries are pushed towards insolvency, nationalist political parties – for example, Finland’s True Finns – have grown stronger, alongside more established counterparts elsewhere in Europe.