@dte: I don't think the nanny states are in much danger of implosion. The Danes just voted in a government that ran on a platform of higher taxes and better services, for example, and I don't see any signs of people flocking to the "gubmint is evil" banner much anywhere else either. Greece is in real danger and Italy is looking a bit dodgy, but neither are really what you mean by nanny states. More like corrupt oligarchies, with governments that make yours look pretty good.
The union itself is in trouble, and I'm starting to believe it may actually split, or be drastically reorganized. This is happening from both top down and bottom up. On the one hand, there's the financial crisis that has exposed the euro's underlying structural fault, and the inability of the EU governance to face the facts and find a solution to it. On the other hand is a rise of Euroskeptic populism in lots of European countries, which makes it even more difficult to find a solution to it.
In my opinion, the main point now should be safeguarding democracy in Greece. It would really suck if it fell back to military rule. That means that it should go into controlled default ASAP, the exposed banks should take their lumps, and the countries whose regulators allowed the banks to get that exposure should backstop them. The current bailout which makes everyone pay, regardless of whether their banks took on Greek debt, isn't fair. And also the democracies in those countries won't accept it. This is one of the main reasons for the success of our left-populist/nationalist/Euroskeptic party, the (True) Finns, for example: our banks have very little exposure, yet the bailout plan has us as one of the bigger per-capita payers. Not fair.
So what next? Walp, either the EU countries come up with a plan that's tolerable to both the crisis countries and the countries bailing them out, and actually resolves the crisis without kicking the can further down the road, or we'll see it unravel. In the former case, I would expect the EU to take a big leap towards federalism. In the latter, I'd expect at least the single currency area to be split. And in the current political climate, a United States of Europe would be a really, really hard sell in the member countries.
The technically best proposal I've seen (IMO of course) is one where the Eurozone is split horizontally. What used to be the Hansa countries plus Finland and perhaps the Baltics would adopt one currency—say, call it the Thaler—, and the Mediterranean countries would adopt another. Call that one the Ducat. Germany would be the leading Thaler country, and France the leading Ducat country. The Ducat would depreciate against the Thaler, which ought to help with the massive internal trade imbalance we have. If we could retain most of the other EU structures, in particular the Schengen free mobility arrangement, this might not work out too bad.
And I think we do need a mechanism for controlled exit from the Euro, and the EU itself. The EU is a unique experiment in history, an empire with no emperor and voluntary membership, and countries are *still* scrambling to join. It's only worth keeping if it's worth joining and staying in. An exit mechanism would strengthen it, not weaken it.
, even they value your opinion.
