@georgeob1,
Answering directly to the initial post, without having read the rest of the thread yet:
georgeob1 wrote:Will the European Union Survive?
Yes, it will. I agree with you about one thing that won't survive in the long run. That's the combination of a single currency and 25-or-so separate fiscal policies. This combination is a recipee for failure when the Eurozone is hit with an asymmetric shock to its economy, as it happened over the last two years. (American economists, unattached to the political symbolism of the Euro, have been predicting this ever since the system was proposed in the early 1990s.) But there are several ways in which this can resolve itself. All of them qualify as "survival", regardless of your semantics.
One scenario is that the European Union changes into something more similar to the United States of America: a central government with a big-enough budget to shift substantial amounts of spending from zones in recession to zones who are fine, or even in danger of overheating. If that's the way it goes, this crisis will have strengthened, not weakened, the European Union.
Another way this can play out---more likely in my opinion---is that countries who cannot keep up leave the Euro, get back their national currencies, and devalue them. This will give them some stimulus to grow their economies. In the most extreme version of this scenario,
all countries abolish the Euro and go back to the pre-1999 status quo. Even so, that would still constitute survival of the EU. There was a European Union in 1998. And in any event, not all EU countries have the Euro even today. So I don't see why the survival of the EU---a customs union, a free-migration zone, a common labor market, and many other things---should depend on the survival of the Euro.
Finally, I don't think that Europe's welfare states have anything to do with it. Of course I understand why you, George, want to make this a Victorian morality play about the virtues of thrift and the vices of being too generous to slackers. That is to be expected from an American Republican. But this is the real world, not a Victorian morality play. Welfare states are no threat to financial systems as long as taxpayers pay for them. Even welfare states taxpayers
don't pay for are no more threatening than tax cuts for which the government doesn't pay in spending cuts. This is what America did during the falsely-glorified presidencies of Reagan and Bush II---presidencies that you, George, both supported. Where was your Victorian frugality then?
For a few cases in point, notice that financial systems are doing just fine in Norway, Sweden, Denmark, and Switzerland, which have generous welfare states but aren't part of the Eurozone. Conversely, consider Slovakia and the Baltic states, which have lean welfare states, flat taxes, and all that, but
are parts of the Eurozone. They suffer as badly as the rest if not more. Therefore I predict that the Eurozone's welfare states will be just as fine after this financial crisis is over.
I have plenty of issues with the European union. Its agricultural policies are pathetic. I always thought the Euro was a bad idea. I disapprove of reforming the EU from a loose confederation of nations into a federal, constitutional republic. But none of my issues, of which there are many more, reaches the level of questioning its survival as an institution.