Europe in Crisis, Yet Again
Alarming newspaper headlines greeted me at London’s Heathrow Airport on my arrival from the Balkans yesterday. The Daily Mail led with the EU President’s warning that “Ireland’s debt crisis could kill the European Union stone-dead.” The Independent’s front page (“Ghost estates and broken lives: the human cost of the Irish crash”) was accompanied by a photo that could have been made in Soweto. “EU left ‘fighting for survival,’” announced the Telegraph.
Having spent two previous weeks in Serbia, Croatia and Bosnia-Herzegovina—where the rhetoric of “European Integration” is still tirelessly parroted by the political class—I was amused to see that the Brussels-registered “Titanic” was performing, yet again, as expected by those of us who would not be sorry to see its demise.
The latest news is that the crisis has been contained. A team of officials from the European Commission, the European Central Bank and the International Monetary Fund came to Dublin with an offer that could not be refused. Ireland is now a state with its sovereignty as limited as that enjoyed by the German Democratic Republic before November 1989. This outcome was also expected, and in the next few days we’ll see many reassuring statements by various EU bureaucrats and Bundesbank officials that the Eurozone is safe and sound.
The underlying structural problems of the euro and of the European Union project itself remain unresolved, however. It was Greece yesterday, it is Ireland today, and with Spain, Portugal, and possibly even Italy, the question is “when,” rather than “if.” The Euro-IMF bailouts will be repeated, with ever greater losses to private bondholders, ever greater hardship to the inhabitants of the Eurozone PIGS (Portugal-Ireland-Greece-Spain), and ever-receding prospect of the experiment’s long-term viability.
The collapse of the single European currency was averted five months ago, following the Greek rescue operation and the establishment of the €440 billion European Financial Stabilization Facility (EFSF). The euro went up from $1.19 in June to $1.41 three weeks ago. Yet only last Tuesday EU Council President Herman Van Rompuy admitted that the EU was “in a survival crisis” and its future uncertain. His words were tantamount to an SOS signal directed at Germany, and German Chancellor Angela Merkel responded reassuringly by declaring that “if the euro fails, then Europe will fail, and with it fails the idea of European values and unity.” Her words reflected the consensus in Berlin and Frankfurt that the cost to Germany of another rescue is well worth the benefit of bringing the Union ever more tightly under its fiscal, economic, and political control. In other words, the Germans remain committed to an ever-tighter Union, controlled by themselves, and they are willing to endure financial costs in achieving it.
As the Financial Times noted, also last Tuesday, the result will “give an official EU imprimatur on Europe’s dirty secret: public treasuries will do anything to make private bank creditors whole.” Their ability to continue doing so indefinitely is far from certain, however. The following day the FT warned that the Irish crisis may herald further “contagious defaults”: there is but “little hope that the other ticking bombs with which Europe’s economies are riddled are going to be disarmed in time.”
The process will continue until the euro is taken apart, or until the four PIGS are expelled from the Eurozone. This may not happen in the next few months but it can hardly be avoided. It is noteworthy that, unlike the Greeks, the Irish had enjoyed two decades of strikingly successful growth before 2008. Its government tried to behave responsibly (unlike its counterparts in Athens) and applied painful austerity measures. As Matthew Lynn of Bloomberg’s London bureau explains, the problem wasn’t Ireland—it was the euro:
When the euro was launched, it was a big bet that sharing the same currency would make a group of very different economies converge, and so allow the European Central Bank tooperate a single monetary policy for all of them. It was an interesting theory, but it turned out to be wrong. The economies are just too different to allow a single central bank to manage all of them. Interest rates are always wrong everywhere. How that expresses itself varies. In Greece, it was a fiscal crisis. In Ireland, a banking collapse. In Spain, a construction bubble that burst. In Germany, a massive trade surplus. But, like a river looking for the sea, it always comes out somewhere. This crisis will keep moving from country to country. The only permanent fix is splitting up the euro into more manageable currency areas.
Until the euro area’s leaders recognize that simple truth, Lynn concludes, every bailout they come up with is only going to shift the attacks elsewhere.
The continued will of the German political and financial establishments to continue maintaining and extending their dominance over “United Europe” as a substitute for the failed past attempts at open continental hegemony is the key. Even if the political will of the country’s elite class remains strong, Germany’s ability to underwrite the bailouts will be severely tested if Spain and Portugal join the fray some time in 2011.
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Another insightful report from Dr. T.
One of my light-hearted amusements is a website devoted to all sorts of trivia; a recent answer to a question I missed was both enlightening and frightening; the city with the most embassies - by far - was not in a capital of some large nation, but was Brussels! This is tribute to the vastness of the bloated bureaucracy of the EU. Other than the hotels, bars and bistros who happily suck off the pols and lobbyists nipple in Bruxelles, who else benefits from this EU monstrosity?
The EU has tried how many referenda that have failed in countries only to to continue to badger the same people again a year later hpoing to get the "correct" result? Is there a better illustration of the disparity between the ruling elite and the citizens (subjects?) who live in these countries?
The EU is a terrible, one-world government idea that contains the seeds of its own destruction. Let's hope it finally expires before it can expand even further and start taking in nations like Turkey!
I have said it before and I will say it again: an EU based solely on trade and defense considerations and comprising only France, Benelux, Germany without East Germany, England without Scotland and Northern Ireland, and whatever Nordic countries wanted in would be a splendid thing indeed. Unfortunately, the economic elites of the Anglo-Franco-Germanic horde are as naïve as Americans in thinking they can annex alien peoples to assimilate into economies and be "just like us." I am not sorry to see the PIIGS living standards fall because they rose in the first place entirely at the expense of the aforementioned countries. But debt restructuring and bailout profits only idiot creditors at the expense of French and German taxpayers. Now they will be expelled from Europe or the Euro will die. The former solution is infinitely preferable; the latter would be a devastating shock to the morale of Northern European countries, and given the state of the West we cannot afford any lower morale. Whether Eastern Europe will be able to hold its own and contribute positively to the EU remains to be seen.
For the love of all that is unholy, would you guys try and find some way to put a lid on your Europhobia and kraut-bashing. I can hardly imagine anything more self-defeating for (nominal) Euro-Americans.(That goes double for you, Nick.)
NGPM just won the award for the best over-the-top neocon neoliberal paragraph of the year.
If the Irish government was clever, it should proclaim that it is in the driver's seat this week in Europe, and demand that as part of the conditions of it taking a bail out, that Europe outlaw abortion and birth control and Ireland revert to the divorce laws that it had previous to the recent so-call "reforms" of their insolent woman president. This whole economic problem is a result of the fall in the European/American/Japanese birthrates and Europe and America letting the Asian conduct predatory trade practices since the late 1960's.
@3,
I don't know why you (apparently) lump me in to the Europhobic camp? I am anything but and am especially a Germanophile dating back to my years there during the Cold War. It is in fact my desire to see the countries and cultures of Europe live as free and INDEPENDENT nations, free from the yoke of deracinated Brussels bureaucrats, that sparks my interest here. I am also emotionally attached to the Slavic nations, especially in the Balkans and don't wish to see them as subjects under EU rule.
As bad as things are at present, the last thing Christian Europe needs now is an expansion of the EU into more countries requiring bailouts and a Turkish presence that will only exacerbate the immigration disaster that already threatens the West.
To highlight the false nature of these transnational pipe dreams like the EU it is instructive to reflect on the story of the proud young German who announces to a group, "Ich bin kein Deutscher, ich bin Europaer!" To which a skeptical wag says to him, "Ok, then say, in European, 'where is the bathroom?"
One can love Europe without loving the E.U. or the Euro. The E.U. as a superstate is doomed to fail because it is conceived around the central idea of hiding from Europe's Christian heritage. Neoconservatives want Europe weak; I want her strong, and in her current status, that is simply not possible. The economic and cultural landscape of the continent, dating back centuries, is one of its greatest strengths. The competition between the various nations has also been good for its historical evolution, at least before the revolutions. But the continent is far too diverse to sustain a single monetary policy without major freeloading. This is bad for the PIIGS countries as well, for their long-term living standards but more importantly for their sociology-cultural landscapes. (Italy's supposed to be one of the bloc's most Catholic and traditional countries? You'd hardly know that after hearing what comes out of the mouths of most Italians my age! Same goes for Spain, and I need not even mention France, though that one is in the Frengebenelux bloc, not PIIGS. The only thoroughly Christian and traditional occidental societies left are in Latin America, though not every element of those societies is western.)
As for the tone of post, it was indeed over-the-top. In my defense I can only say that, living in Frengebenelux, paying taxes and watching my conscripted money go into to E.U., I find it somewhat de-stressing to rail a bit over the top. Red wine also helps, and so I drank some last night. Now I can modulate and qualify my posting: among the traditionally-minded, I prefer the company of the Italians and Spanish, as well as the French and Latin Americans, to that of most other nationalities. That is just my personality; it does not imply that traditional Americans, British, Germans et c. are inferior. However, I do consider that the Mediterranean world is the heir to a superior civilization, and that the Northern countries are at their best when the draw from this wonderful well.
If all that were not so, I would not live in France and spend my holidays in Italy or the Riviera--in the company of Mediterranean locals.
I don't know, people have been dooming the EU for a while now. I have a feeling it'll outlive all of us. Adding in Turkey would be entertaining; I doubt they'd get along very well.
The French are protesting mohammedan defiance by celebrating wine and pork feasts.
The Icelandic crisis came first, so I recommend that this blog's readers watch Inside Job -- even if it's to scoff Eliot Spitzer and hiss when the Soros devil is on screen.
@NGPM:
I happen to be a Dalmatian Croat so we are Mediterranean brothers.
Bro, your point about MEditerranean coutries being heirs to a superior civilization is very well taken. Nobody can deny that the Hellenistic-minded ancients were a hairlength away from ushering in an industrial revolution.
BUT, AS FAR AS MODERN TIMES GO, PLEASE make a distinction between European Mediterranean countries like Italy, Croatia, Spain, Occitania vs. places like Serbia/Turkey and Egypt.
You see, contrary to Arabist historians, the Islamic invasions of the Mediterranean snuffed out much of the vibrant classical thought and civilization ripe in the Eastern Mediterranean.
For the past 1400, the place was ripe with Islamist movements and intellectual decline. Little progress has been made by the Arabic speaking empires or the Ottoman empire in the areas of science and philosophy. Instead, jihad and piracy were the area's most notable features.
Egypt was abounding in Hellenistic thought before Muhammad's message reached it. Serbia was a prosperous corner of the Roman empire. What is Serbia today after the rape of its women and culture for nearly 500 years? A hateful,bitter, and intellectually void part of Europe(if Serbia is considered to be a part of Europe). The same is true of Greece which bears little resemblence to its classical past and is no different from Iraq, per se, save for its Orthodox faith(or political ideology).
Although Dr. Trifkovic is a Serb, I find his literature very interesting to read. Usually, Serbs whine and complain about their Kosovo situation and their loss in Operation Storm and often come up with 9/11 conspiracy theories. BUT, Dr. Trifkovic is quite different. He looks at Balkan politics from all perspectives and GOES TO THE ROOT OF THE PROBLEM---Ottoman legacy and the elephant in the room today which is TURKEY, not Albania or Croatia or the fictitious Zionist-Crusader alliance. His analysis of the modern jihad and the Ottoman legacy is UNRIVALED. No anti-jihad writer comes close.
Keep up the good work, brate!
PS: Tesla was a Hrvat, get over it already. ;-D
NGPM is a twat! That is all:)
I'm not particularly offended, though I confess the vulgarity of the remark is a bit of a shock in itself.
Strange, I thought Angela Merkel was supposedly the stingy German isolationist refusing to help other fellow Europeans or maintain European unity out of selfishness...at least that's the impression The Economist would have given you.
Historically, "Christian Democrats" of WHATEVER nationality have very often been loons, liars and marauders. With the exception of a few partisan fanboys who worship Nico Sarkozy and his ilk, even the right wing in Europe is constantly exasperated with them. One Italian conservative journalist said back in the 1960s or 70s, "Hold your nose and vote DC [Democrazia Cristiana]."
But then, as Mr. Sanjay hints, if anyone really believes anything the Economist touts, we've got a bridge in London to sell to him.
I am frequently impressed by that magazine's tactics, because it probably makes it a more intelligent version of Fox News.
Hannity and Colmes criticise Obama for being pacifistic and soft on terrorists, right when Obama steps anti-terror operations to unprecedented levels. Rest of the population left to defending Obama's pacifism or criticising his pacifism - a false debate.
But The Economist seems to have been so successful in subtly painting this false characterization that it probably shames Fox News - to show a Euro-federalist as a scheming reactionary isolationist who refuses to improve living standards of other European nations and is only interested in making Germans richer than the poorer Italians and Spaniards...when she is anything but that. Masterstroke.
I am frequently impressed by that magazine’s tactics, because it probably makes it a more intelligent version of Fox News.
!!*NICE ONE*!!
The Economist seems to have been so successful in subtly painting this false characterization that it probably shames Fox News – to show a Euro-federalist as a scheming reactionary isolationist who refuses to improve living standards of other European nations and is only interested in making Germans richer than the poorer Italians and Spaniards…when she is anything but that. Masterstroke.
Angela Merkel is indeed interested in "making Germans richer," though I think you meant to say "making the Germans richer," which would make your sentence entirely true. For the CDU-CSU, like every other "center-right" and "center-left" party, is a tool of the global bourgeois plutocrat class--which surely includes some Germans--and the principal instrument for their self-serving enrichment, at the expense of everyone else and EVERYTHING ELSE.
Marx thought that the world would explode in a global proletariat revolution and usher in the Brave New Era of communist society. In fact it was a global bourgeois revolution, but the result has been more or less the same thing.
And as of yesterday, Ireland is now applying for the bailout, as Dr. T predicted. But since Dr. T is right about almost everything (seriously is), this comment is rather redundant.
From the New York Times itself:
“We are not part of the euro and don’t want to be part of the euro,” Mr. Osborne told the BBC. “But Ireland is our very closest economic neighbor so I judged it to be in our national interest to be part of the international efforts to help the Irish.”
Ireland would have done better to keep the punt pegged to the pound. From what I have read, as Britain was Ireland's largest trading partner until very recently in history, the Irish decision to drop that parity and move to the European Monetary System had rather disruptive effects on their economy.
The European ideal as it is conceived in the modern European Union is at once so untenable and so deeply entrenched in the minds of the European political classes that it is difficult, nay impossible, to see how we will not end up suffering massive damage before it is all through.
"From conception through gestation, birth and into it's early infancy the euro has consistently proved the sceptics wrong" -- Nial Ferguson The Cash Nexus
"We are not part of the euro and don’t want to be part of the euro."
They (the Brits) said the same thing about joining the European Economic Community (EEC). Then they joined. (They haad to go cap in hand. De Gaulle vetoed their bid. Twice. On the third try, Giscard d'Estaing let them in. Now the Yanks have their Trojan Horse in the union.)
Re: post #21,
The Elder Daughter strikes again!
@2 Right!! Germany without East Germany! Turn back the clock to 1990! England without Scotland and Northern Ireland? Turn the clock back to 1600! Whew, we really dodged an arrow there--he didn't mention an England without Wales.
The 'without East Germany' might not be necessary now, because last year, the wealthiest German states in the former east passed the poorest states in the west in per capita wealth. The east is still moving up and most think it will match the west in a few more years.