The death of former British prime minister Margaret Thatcher—which coincided with the continuing financial crisis in Europe—has revived interest in the late Tory leader's consistent opposition to the establishment of a European federal "superstate" with its own common monetary and fiscal policies. Thatcher regarded such an arrangement as contrary not only to economic common sense, but even more importantly, antithetical to the political-cultural concept of nationhood.

Critics of Thatcher blasted her for supposedly placing economic considerations based on free-market dogma above principles rooted in the sense of collective and societal identities. But the conservative leader was actually an ardent traditional nationalist who recognized the unique historical and cultural conditions that helped give birth to laissez-faire economics in Great Britain and other societies. She understood that strengthening and preserving economic freedom requires continued commitment to political liberty as experienced in the context of an independent nation-state and an international free-trade system.

So it was not surprising that while Thatcher supported the evolution of a European free-trade bloc and the reunification of Germany in the aftermath of the collapse of the Berlin Wall as part of a new post–Cold War Europe, she never bought into the fantasy of a United States of Europe and remained suspicious about Germany's role in that project.

The worst-case scenario from Thatcher's perspective was not that a unified Germany would try once again to impose its military power over Europe. Instead, if Britain and other governments in the continent were forced to accept the dictates of European bureaucrats and regulators that reflect the priorities of the most powerful national economy, the other nations would gradually lose their independence. They would be unable to make their own fiscal and monetary policies based on their economic interests as well as on their national-cultural values and history (the special relationship with the United States and the Anglosphere being part of British history).

And, indeed, while the policymakers and pundits who have dominated the discourse over the eurozone crisis tend to explain it as a clash between fiscal and monetary policies, Thatcher believed it was the political question—who has the power to make these policy decisions—that was at the center of this debate.

The economic issue of slave trade may have been the focus of the debate that preceded the American Civil War, but it was the political disagreement between the North and the South over who would determine the outcome of that debate (in turn reflecting opposing cultural values) that ended up igniting the war.

Europe may now be in a similar turning point. Joined by its northern European partners, Germany—with its culture that celebrates thrift and castigates debt, as well as a history that affects its aversion to inflation—is not allowing the spendthrift southern Europeans to set the nature and the scope of fiscal and monetary policymaking for the eurozone. And by extension, this also goes for the entire European Union (EU).

Economists can debate forever whether the post–Great Recession economies required more or less monetary easing and fiscal activism. But from the perspective of their own national experience, the Germans (or for that matter, the Dutch, the Scandinavians, the Poles or the Baltic nations) believe that their approach of deficit cutting and saving worked. Their governments and citizens don't see any reason why they should reward Europeans who don't subscribe to their set of values with the wealth that they have won through their hard work.

That is the same kind of thinking that has led similar rebellions against the economic free riders by the residents of Catalonia, Lombardy, Bavaria or Scotland: these small nations ponder secession from larger political units that they perceive to be exploiting their more prosperous economies.

The result is that the Franco-German-led European project, which was supposed to neuter the old aggressive form of German nationalism, has created a semblance of German economic hegemony in Europe. Under this system, technocrats approved by Berlin are set to carry out the German dictates in its economic protectorates.

This new reality is igniting a political backlash, including populist insurgencies in Greece and Italy. These reactions are directed against Germany as well as the ruling political and economic elites. In one instance, the case of Cyprus, they even led to the internationalization of that financial crisis.

Unlike of the German occupation of World War II, no one is forcing Greece or other financially distressed countries to remain in the eurozone or the EU. And, indeed, Thatcher's euroskepticism seems to be gaining more support in Britain and even in Germany itself, where many would like to see their country cease carrying the burden of subsidizing the EU and replace the euro with the old deutschmark.

Recreating the European project as a free-trade area would still secure Germany's position as the most powerful economy in the EU—while allowing the poorer economies to embrace independent fiscal and monetary policies, including the devaluation of their currencies as part of an effort to revive their ailing economies. In a way, the most effective way to weaken the power of rising nationalism in Europe would be by reasserting the power of the nation-state.

Leon Hadar, senior analyst at Wikistrat, a geostrategic consulting group, is the author of Sandstorm: Policy Failure in the Middle East.