The classic World War II movie goes like this: Farm boy ships out to fight in Europe, guns down rows of Germans, falls in love in Paris, returns home to start a new life in the suburbs, drinks to forget his fallen comrades and ultimately prospers. Cue the "Mad Men" theme music.

That's the Hollywood version, anyway. The version in Europe is a lot darker, as the centuries of national rivalries and resentments that sparked the conflict never really went away on V-E Day, and reverberations of old grudges are even now putting the hard, bitter edge on the Continent's currency crisis.

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One veteran analyst of the European financial system believes that the seeds of what he calls today's "global depression" were sprouted on the fields and cliffs of the Ardennes, Anzio and Normandy, and have grown like weeds to smother and poison the current generation. That makes the present more like a "sins of the fathers" horror picture than a heroic action flick. His point: Don't expect a happy ending.

We have Ambrose Evans-Pritchard, the long-time international-business editor of the London Telegraph, to thank for this cheery view. He has covered the European Union since its infancy and leverages his deep knowledge of the players and their motives to warn investors to beware of any outbreaks of optimism.

"We are in 21st-century depression, which is just like the 1930s, except with a bigger welfare cushion," he said this week in an interview from his home in London. "It's taken a long time to get here, and it'll take a long time to get out."

Creating the EU -- and a problem
Hard to argue with that. Consider that European governments have spent hundreds of billions of dollars in fiscal and monetary stimuli, much like the United States and China have, yet have far less to show for it. Most analysts foresee zero growth or worse for the eurozone in 2010, and virtually every measure of economic health is now running in reverse after having briefly brightened late last year. Bank loans are declining; money growth is way down; the euro and pound sterling have plunged.

Why has Europe failed to recover from the 2008 credit collapse while the United States, Japan and emerging markets are buoyant or, in some cases, rocking? U.S. growth is likely to kick in at 4% this year, after all, while China is revving gross domestic product at 8% annualized, Malaysia at 13.5% and Hong Kong at 14.5%.

Evans-Pritchard says you need to dial back to the period immediately after World War II to truly understand the answer and discover what has recently gone wrong.

After the war, he observes, France wanted nothing more than to punish Germany by destroying its industrial might and reverting it to a pastoral state. Revenge, not reconciliation, was on its leaders' minds. But the United States took a broader view, as President Harry S. Truman and other American leaders had determined that the Soviet Union had become the top threat to world peace. So, together with Secretary of State George Marshall, Truman devised a program to rebuild parts of Europe, including Germany, as a bulwark against communism. (Marshall Plan funds and expertise were offered to the Soviet Union and its allies, but were rejected.)

The new German leadership led a humiliated population with a lot to prove, and together their thrift, genius and hard work generated enough savings to create and buttress the Continent's most admired economic system. A stridently apolitical central financial authority called the Bundesbank -- the equivalent of the U.S. Federal Reserve -- stood at the center of the recovery, and its deutsche mark became the most credible currency in the world after the U.S. dollar.

As French, Italian and other West European governments increasingly created high-tax socialist states under the influence of powerful and inflexible labour unions in the postwar era, Germany created a state largely focused on individual accomplishment and self-denial. When recessions periodically hit the Continent in the 1950s and '60s, companies in the most socialist nations could not easily lay off employees to align expenses with income, while German companies were much more capable of coping. Over time, profitable, hard-nosed German companies came to dominate the Continent, just as the French had long feared.

In part to blunt Germany's newfound strength, and in part to break down the nationalism that had led to two world wars in three decades that had killed 90 million people, politicians in France, Italy, Luxembourg, the Netherlands, West Germany and Belgium began to take steps to work cooperatively. Their first step was the creation of the European Coal and Steel Community in 1951 to share control of that key war-making commodity, and by the mid-1960s the concept of a full-blown economic community emerged, complete with treaties that bound the former enemies' fortunes together.

Although that sounds reasonable, the reality is quite different. Evans-Pritchard argues that the European Union, which is governed by a parliament that meets in Brussels, has always been a sham because it lacks taxation, military power and a single language, and polls regularly find it is derided by citizens of the Continent as anti-democratic, authoritarian and even dangerous. Recognizing that the EU needed some sort of social glue to prevent its rupture, technocrats managed to persuade the member nations to create a single currency, the euro.

Although the headline rationale was to create a unified front against the hegemonic U.S. dollar and the Japanese yen, the reality was that EU politicians believed that only a single currency could keep this organization composed of wildly different and antagonistic cultures from spinning apart.

West Germany at first balked at joining the eurozone. Its good-as-gold deutsche mark and the independent Bundesbank were its pride and joy, and it feared defiling them with France's and Italy's highly political approach to finance. But Chancellor Helmut Kohl was strong-armed into accepting the European Monetary Union when he needed his neighbours' help in reunifying with East Germany in 1990 after the fall of the Iron Curtain.

Evans-Pritchard says we should see the role of Germany in the EMU as similar to that played by insurance companies that guarantee municipal debt in the United States. Because its financial strength backed the euro, countries that signed on to the EMU enjoyed Germany's triple-A rating. This greatly lowered the cost of financing government bonds -- also known as sovereign debt -- for every country that subsequently joined.

In the beginning, the European Union tried to enforce adherence to strict rules of financial sobriety, known as the Maastricht criteria, on countries that wished to join. But once EU co-founder Belgium was allowed to join the eurozone despite government debt well in excess of the criteria, the idealistic politicians who ran the union felt obligated to turn a blind eye on the financial insufficiencies of other countries, most notably Greece, Spain, Portugal, Ireland and Italy.

Evans-Pritchard says his contacts among German officials at the EU begged their leadership not to give in, as they didn't trust Greece in particular, but the expansion of pan-European monetary power was determined to be more important, and the naysayers' doubts were shoved aside.