ANOTHER GREEK CAN--KICKING / THE WALL STREET JOURNAL

Another Greek Can-Kicking

There won’t be light at the tunnel’s end until Germany kicks itself out of the eurozone.

By Holman W. Jenkins, Jr.

July 14, 2015 7:59 p.m. ET

  Greek Prime Minister Alexis Tsipras and German Chancellor Angela Merkel at a news conference in Berlin, March 23. Photo: tobias schwarz/Agence France-Presse/Getty Images


If you’re a Greek who no longer has much money in the Greek banks, Grexit is looking better and better. That’s even with the latest tentative bailout deal, which is the extend-and-pretend variety: It’s unlikely to get the Greek economy moving or end Greece’s destabilizing cycle of crisis upon crisis.

If you still have money tied up in Greek deposits, you might feel differently. Another bailout might seem another chance to get your money out without suffering a haircut (to recapitalize Greece’s broken banks) and conversion to the drachma (an outcome still in the cards). You are willing, then, to sacrifice the economy’s return to long-term health to maximize your chance of reclaiming your life savings.

If you’re Angela Merkel, you’re willing to settle for another extend-and-pretend bailout of Greece because you don’t want Grexit on your watch. But you also don’t want a shellacking from your domestic German voters who are weary of seeing their money go to prop up the Greeks. That’s why you’re pleased with co-conspirator France stepping out as defender of Greece and promoter of fake plaudits for the Greek bailout. A European tradition is that Germany likes to be seen deferring to France to quell any idea that Germany is becoming strident and imperialistic again.

No actual long-term problem of Greece or the eurozone is being solved here, however. At the same time, don’t believe cries that Greece must be saved or the European project is doomed.

This is a case of the propaganda that was used to sell the euro in the first place coming back to haunt. Stop lying to yourselves, Europeans. Currency integration was not necessary for the European Union to succeed. It isn’t necessary so Europe can have clout in the world. It’s not necessary in order to avoid another war, as former German Chancellor Helmut Kohl was fond of implying.

If anything, the single currency is undermining the larger European project. The antidote to fascism is becoming a stimulant to fascism as the eurozone overreaches to impose what amounts to nation-building on Greece even as it continues to accommodate France and Italy, whose debts pose the real long-term threat to European togetherness.

Let’s quickly add that the euro is a failure only because it wasn’t allowed to work. If we have learned anything about “optimal” currency zones, fiscal discipline has to begin with lenders, not borrowers—with bankers and fund managers knowing their money will be lost if they lend to countries on unsustainable paths.

That said, authentic market discipline was never realistically compatible with modern European welfare and interest-group politics, as the eurozone lately has been proving over and over.

Which brings us to Hans-Olaf Henkel. Back in the day, pro-business Europhiles like Mr. Henkel—he ran IBM Europe and headed a prestigious German trade group—embraced the common currency as a lever to compel pro-market policy change. “Structural and competitive weaknesses will now be mercilessly exposed,” he preached.

Alas, it was not to be. The euro, which was supposed to be the rod that spanked the Europeans into reforming their welfare states, became the opposite, the enabler of Europe’s growing debt addiction.

Mr. Henkel saw the error of his ways. He co-founded Germany’s version of the anti-euro political party that has been popping up all over the Continent, but with a difference: His party, Alternative for Germany, still believed in the European Union, it still believed in the common market, just not the single currency.

As of last week, though, he separated himself from the party over its growing anti-immigrant wing, a sign of troubles percolating across Europe. Last year he warned that a British vote to exit the European Union would be the “worst scenario” for the forces trying to save Europe from itself.

Mr. Henkel wrote a book proposing a bifurcated currency system. The uncompetitive southern countries, including France, would keep the euro. They would be spared messy currency conversions.

They would be spared bank runs. Germany and other creditor nations would bear much of the cost of adjustment by adopting a new, strong currency, essentially a deutsche mark in all but name.

What about the supply-side reforms that were also part of this week’s Greek deal? If enacted, wouldn’t they contribute to genuine recovery inside the euro system? It can’t be repeated often enough: The currency the Greeks use matters less than the domestic policies they adopt for true prosperity. But missing is any evidence from recent experience that such changes of heart can be imposed successfully from outside.