Will the Pan-European Idea Get Buried Under Debts?

Friday, March 19, 2010

Watching the rapid deterioration of unity in the Eurozone, this blogger begins to wonder whether the hardest crisis since WW2 will deepen the rifts in a culturally diversified region where the biggest common denominator has become debt. Only a few months after the ratification of the Lisbon Treaty - despite initial no-votes in France, the Netherlands and Ireland where the voters will was overridden by governments - the helplessness of EU bodies to tackle the economic plunge resulting from irresponsible monetary policy by the ECB during the last decade, the unwillingness of EU citizens cannot be overlooked anymore.
Protests and strikes have erupted. A strike of French refinery workers uncovered the thin pillow of European prosperity: 10 days and France would have been out of fuel.
Greek protest have been going on for months, first about police brutality and now escalating as the sovereign discovers the enormous size of the disaster. Greece is bankrupt and needs a lifeline. Meanwhile the country is crippled by one general strike after the other.
In Germany Lufthansa airline pilots bang the drum for another strike, while the UK, bankrupt as Greece, only in a much bigger dimension, tries to avert a strike of cabin staff at British Airways.
Europe is also not short in internal separatist movements.

  • The Basques want to break away from Spain.
  • Belgium, the heart of the Eurocracy, wants to be split by both Flanders and Wallons.
  • North Ireland is the independence thorn in the UK. Scotland's independence movement has seen muted times for a while, but the impending collapse of public finances can change that any day.
  • Corsican islanders have been trying to break away from Paris since decades.
  • Czechoslovakia parted into the Czech Republic and Slovakia soon after the iron curtain fell 1990.
Sounds hardly Pan-European.
Taking into account that Europe is a Babylon of 23 official EU languages and several dozen languages or dialects are recognized by state governments will make it clear to every non-European that cultures and life habits are equally diversified since centuries.
The onslaught of international chain outlets from H&M to Prada is not equally and entirely welcome on Europe's main streets as it the same loss of diversity that was associated with socialist countries and their limited selection of goods.
First burps at a new level of aggression came from the currently most beleaguered Eurozone member, headline-grabbing Greece that raised the point that Nazi Germany had stolen its gold and never returned. For the latest in the German-Greek conflict read my previous post.
German calls for more austerity measures in weaker economies raised more grumbling voices in Europe, wrote the New York Times on Wednesday, catching the anti-German mood very well.

Resentments Against Germany Stick
I think I am not spilling any beans when reminding of the fact that hostility towards Germany has not disappeared since WW2. It has turned into a mix of admiration about the economic power, coupled with never-ending resentments against Nazi Germany. All European countries except Mussolini-Italy and neutral Portugal and Switzerland have suffered heavily 70 years ago. This is as unforgotten as is the Holocaust.
German Chancellor Angela Merkel, who was born in communist East Germany, is certainly a driving force in Europe's integration. But she may run into resistance if others detect any kind of arrogance or high morale in her actions that could derail the integration process, doubted by more and more Europeans as they see a high level of inconclusiveness but not a single step of progress in reining the financial sector.
So far all attempts remained such. Take the regulation of hedge funds: Sorry, says UK's Gordon Brown. Take the EMF: Except for German Finance Minister Schaeuble there are no supporters.
France's Sarkozy will also have to walk a fine line in the future. He is expected to be told off in upcoming French regional elections and the French don't really endorse the idea that his cuddling with Merkel may look as if France walks on Germany's leash.
On the other hand nobody wins anything by calling on Germany to lower its trade surplus. As the Eurozone recorded a roughly unchanged current account deficit of €27 billion in Q4 2009 YOY I don't want to imagine how stable Europe would look without its economic locomotive.
The drift apart intensified on Wednesday. The eurozone’s united front against involving the International Monetary Fund in a rescue operation for Greece is cracking, with at least three of the area’s 16 nations open to calling in the IMF if needed, EU policymakers said on Wednesday. Finland, the Netherlands and Italy were all increasingly favourable to turning to the IMF for financial aid if Athens was unable to meet its debt refinancing at reasonable cost, reports FT Alphaville.

UDE: United Debts of Europe
While other Eurozone members fear a too powerful Germany, this is actually a myth. Germany itself has surpassed the 60% level of permitted debt-to-GDP. It has to bring its house in order as all other Eurozone members. There is no rich uncle left in Europe.

TABLE: Debt-to-GDP ratios of all Eurozone members. Everybody is in debt, albei at strongly varying levels. Pls note that 2009 figures will show an expansion of debt in all Eurozone countries. They are expected to rise still more to a minimum of 100% and more, the ECB predicts.
Historically the collapse of government finances has always led to political change. I am afraid how this one will turn out. A new report by the British Ministry of Defence (pdf) with an outlook until 2040 makes Armageddon appear the better choice. I hope you find time to cross-read the whole report. It's worth it.


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