Naked Capitalism Link of the Day

Today's link: Europe's return to Westphalia, at the Financial Times

A little while ago I spoke at a small gathering hosted by Portugal’s Fundação Oriente at the Arrábida monastery near Lisbon. I called my contribution “Europe’s return to Westphalia”. The thesis – that the Union is turning back the clock a few hundred years as it succumbs to the pressure of resurgent nationalisms – was intended as a provocation. As I watch Europe’s leaders stumbling through the debt crisis I am increasingly persuaded that this is no more than a simple description of present reality.
The modern European state was born with the peace of Westphalia in 1648. The doctrine of state sovereignty replaced the waning supranational authority of the church. As the distinguished Brussels diplomat Robert Cooper has observed, Europe’s rulers purchased domestic order and popular consent at the price of more competition between states.
This system endured until the middle of the 20th century, when the appalling devastation wrought by the second great war within 30 years finally persuaded the continent’s leaders that the cost of sustaining a European order based on the balance of power had become too high.
Europe’s postmodern experiment in shared sovereignty has so far lasted 60 years. Now the bargain is unravelling as governments once again separate narrow national from wider mutual interests. The world has globalised, but politics remains local. Europe’s states are responding to domestic pressures by seeking to reclaim Westphalian independence.
Not long ago the Union was held up as the model for the new multipolar international order. By pooling sovereignty, Europe had cracked the big challenge of globalisation: how to marry cross-border interdependence with national politics. Integration turned a zero-sum game into a positive-sum game.

A little history for the morning.  It appears that the Euro's potentially fatal flaw, which mirrors the United States system at an earlier point in history, is that the individual nations are tied by a single currency, but a single central bank controls monetary policy.  Therefore, the problems in the PIIG countries can't be alleviated by each individual state weakening its currency.  This is the same sort of financial union in which U.S. states are combined, but the states don't have hundreds of years of state sovereignty to overcome in a short period of time.  The Euro is an important improvement in European history, but it may have been rushed into without the proper preparations and compromises made.  I hate to see it go, but it may be doomed.  The return of nationalism to Europe probably won't work out well.