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European crisis

For Europe's Single Currency, Democracy Is Dangerous

For Europe's Single Currency, Democracy Is Dangerous

Photograph by Filippo Monteforte/Getty Images

As a politician, you know you’re in a pickle when the thing you fear most is public opinion. Europe’s political and financial elites are still strongly committed to the euro. But the people of Europe are far less enthusiastic about the tighter integration that will be required to preserve the 17-nation common currency. Creditors, such as the Germans, don’t like opening their wallets and debtors, such as the Greeks, don’t like submitting to the dictates of the people with the money. So pretty much no one is happy.

The latest democratic threat to the euro comes from the Irish, who have a history of acting up. Prime Minister Enda Kenny said Feb. 28 that the government will name a date for a ballot in the coming weeks on ratifying the new European fiscal compact. Optimistically, he said it would give the Irish people a chance to reaffirm the nation’s commitment to the euro. Of course, it’s also possible that the vote will be “no.” Bloomberg’s Finbarr Flynn and Joe Brennan quoted Thomas Costerg, an economist at Standard Chartered in London, who said, “This referendum carries huge risks. … It may increase nervousness about the future of the euro area’s perimeter.”

There is one bright spot for Kenny. To make sure the Irish vote yes, the European powers may sweeten Ireland’s bailout program. “It does give the government some leverage,” Liam Dunne, an analyst at Bloxham in Dublin, told Bloomberg’s Flynn.

The dilemma for the officials who are striving to hold the euro zone together is that the more concessions they make to the likes of Greece, Ireland, and Portugal, the more they will enrage voters in Germany, the Netherlands, and Finland. And, of course, vice versa. Not a fun time to be a eurocrat.

Coy is Bloomberg Businessweek's economics editor. His Twitter handle is @petercoy.

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