Edward Hadas

The European Union has rarely looked so united. The disparate members have joined up to mount a strong defence of the region’s single currency. But the EU has also never looked so close to dissolution, divided by tensions between more and less fiscally responsible and economically successful countries. The fate of the union could follow either of two historical precedents with starkly different outcomes.

Exactly 150 years ago, on May 27, 1860, Giuseppe Garibaldi started to besiege Palermo. The city was the capital of the Kingdom of the Two Sicilies, which had lasted in roughly the same form for almost six centuries. Most of the establishment at the time, including the Pope and Emperor Napoleon III of France, dismissed the notion of an Italian nation.

The romantic nationalist Garibaldi proved them wrong. Italy was unified under the Turin-based king of Sardinia. Huge regional differences in history, economy and culture have been diminished by the flow of people from south to north and of government money and bureaucracy in the other direction. The unified Italy has survived and prospered.

The less optimistic precedent is Yugoslavia. An expansion of the Kingdom of Serbia, the country was created after the First World War. Strong Slavic ethnic identity made it only slightly less likely to succeed as a nation than Italy. And Yugoslavia’s disparate peoples seemed on the path to unity for most of the following six decades.

But everything fell apart quickly 30 years ago, after the May 1980 death of Marshall Tito. Without Yugoslavia’s longstanding autocratic leader, the Serbian nationalism that had supposedly been crushed proved a potent divisive and destructive force.

Overall, the last two millennia of European history look more Yugoslav than Italian. But the last half-century has been more Italian, helped by the increasingly free movement of ideas, money and people.

For the future, much depends on the region’s collective memory, a term coined by Maurice Halbwachs, a French — or is that European? — sociologist. Europeans may choose to read their history as an inevitable movement towards unity. If they do that, Athens and Berlin may prove no more distant than Palermo and Turin.

By Martin Hutchinson and Edward Hadas

Investors rarely like wars or rumors of war. But for global markets, the renewed military tension on the Korean peninsula comes at a particularly sensitive time. The threat to this fairly big economy — South Korea’s GDP is four times larger than Greece’s — adds to the impression of a world out of control.

South Korea’s response to confirmation that the North torpedoed a Southern naval vessel in March seems proportionate, merited and economically minor — sanctions will hit an annual trade of only $286 million, about 0.3 percent of South Korea’s GDP. The effect on the already impoverished Northerners may even be mitigated by China, Pyongyang’s traditional ally.

In more settled economic times, markets could probably absorb this increase in Korean tension without too much difficulty. Everyone knows North Korea is dangerously unpredictable. Investors usually respond to provocative actions with only a brief flurry of worry. They sometimes even interpret aggression as desperation, and dream of potential gains from eventual Korean unification.

This time could be different. As of Tuesday, the Korean stock market had dropped 8 percent since the official report on the sinking, and the won had fallen by a similar proportion against the dollar. Investors may be thinking South Korean companies will face higher capital costs or that military expense will hold back the country’s growth. Or they may just be blindly shunning geopolitical risk.

The fear is likely to be exaggerated. An all-out war can probably be avoided, even if North Korea’s announcement of a freeze in relations leads to direct military confrontations. What’s more, while the Korean economy is bigger than Greece’s, it accounts for only 1.5 percent of global GDP. The euro zone contributes 22 percent.

The political forces which threaten the Koreas are completely different from those that are shaking confidence in the euro zone. But there is one unfortunate similarity. Until a few months ago, the governments, which had responded so powerfully to the financial crisis, were a comfort to markets. But weak and wild policies around the globe are undermining that conviction.