Europe’s New Economic Divide

Europe still wrestles over how to resolve the debt crisis in Greece. The managing director of the International Monetary Fund warned this month that Greece’s debt remains unsustainable, and she urged the country’s European partners to prepare to provide significant relief. “Few voters anywhere in Europe are excited about bailing out Greece’s government,” writes Chris Miller, Yale doctoral student and a research associate at the Hoover Institution. He points to an east-west divide in addition to the north-south one. Countries in Western Europe that provide generous social programs with high ratios of debt to GDP, are generally less critical of Greece, fearing that they, too, might need bailouts someday. The former socialist countries in Eastern Europe like Poland, Estonia, Latvia and Slovakia are less wealthy than Greece and less sympathetic. Europe’s politics are becoming divided in more ways than one.
Europe’s New Economic Divide
(L-R) Greek Prime Minister Alexis Tsipras, European Commission President Jean-Claude Juncker, French President Francois Hollande, and Belgian Prime Minister Charles Michel at a meeting of eurozone heads of state at the EU Council building in Brussels on July 12, 2015. AP Photo/Geert Vanden Wijngaert
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To observers of European politics, it came as no surprise to see France and Germany taking opposing positions as talks over Greece’s new bailout deal came down to the wire in mid-July. The Franco-German engine has driven European politics for decades with separate visions for economic policy: Berlin demands greater fiscal and monetary discipline, and Paris focuses instead on using government spending to stimulate growth.

That much remains true today—but the constellations of countries supporting the German and French positions have shifted. No longer is Europe’s main divide between austere northerners and profligate southerners. The key axis dividing the continent today is east–west, a curious alliance between free-market advocates in Western Europe and those in former communist countries.