If something cannot go on, a wise man once said, it will stop.
That's shaping up as a sound prediction about Europe's misguided obsession with severe fiscal austerity, which was repudiated by voters in France and Greece over the weekend.
Global financial markets were intially rattled by the election results, which gave France a new Socialist leader and drained backing from mainstream Greek parties supporting the harsh bailout terms imposed on that country as a result of its own mismanagement. But at this late date, no one should be surprised by such election news.
It's obvious by now that all-austerity-all-the-time isn't helping end the eurozone fiscal crisis. Nor is it sustainable over the long run in democratic societies, where voters get to have a say. Predictably, European voters are starting to reject the all-pain, no-gain approach insisted upon so far by their leaders, an approach that has plunged the continent into recession, sent eurozone unemployment climbing to 10.9 percent, and made it all the more difficult to balance national budgets.
The election news doesn't mean austerity will end overnight -- or that European countries can go back to business as usual. On the contrary, it's crucial that they loosen labor laws that make firms hesitant to hire, ease business formation and crack down on corruption. Collecting taxes more effectively, for instance, might permit lower tax rates. Eventually they'll also have to wean themselves from borrowing and cut back social programs. But in the short run, these two steps won't help and might even hurt.
Needed right now is a greater emphasis on growth, just as France's president-elect, François Hollande, implied during his campaign. What would help? First, the European Central Bank, which late last year staved off disaster by flooding the continent with cheap money, could cut interest rates further. And Germany must do its part by loosening the purse strings to increase spending on imports.
Holders of European government bonds, moreoever, will have to take further losses. This in turn will require propping up continental banks. But it's hard to see how Europe can overcome the massive burden of heavy debt on a shrinking economy without defaulting on some of what it owes, as Greece has done. Postponing the inevitable will only inflict more pointless suffering.
Yet these measures are far from certain to cure Europe's fiscal woes -- or prevent them from leapfrogging the Atlantic to infect the U.S. economy. Even given the right short-term policies, Europe's real choice remains stark: Come together in a tighter fiscal and political union, which voters in Germany and elsewhere do not seem to want, or break apart and resume using francs, drachmas, lire and other national currencies that were replaced by the euro in 2002.
Accomplishing such a restoration would mean surmounting huge obstacles, not least the fear that Europe will once again dissolve into conflict and even violence. The euro, after all, wasn't intended as just a medium of exchange. It was also a glue meant to bind previously hostile nations -- a means of making the ideal of Europe real.
Another wise man observed that breaking up is hard to do. True enough. But for Europe, staying together will likely prove even harder.