Europe Has Wasted a Good Crisis

Yves here. This post is an understated version of a reading that a well-connected colleague gave me after spending three weeks in Europe: that the Eurozone is headed towards breakup.

By Ashoda Mody, Charles and Marie Robertson Visiting Professor in International Economic Policy at the Woodrow Wilson School, Princeton University. Originally published at Bruegel.

The folklore has been that European integration proceeds by “falling forward.” In a crisis, when Europe stumbles, it gets up to move forward. A setback is met with a new resolve for more robust integration. Anticipation of such progression was central to the construction of the euro area, which arose from conflicting national interests as a manifestly deficient economic structure.

The recent European Parliamentary elections were a crucial test of this thesis. With the widespread damage wrought by the euro now clear to all, the test was whether European politics would coalesce around a shared vision for the greater political integration needed to support the euro. The result was not encouraging: national interests dominated, moving Europe from a financial to a potentially political crisis.

A growing east-west divide, a core-periphery rift, the rise of extremist parties and the adoption of extremist rhetoric and their policy agenda by the mainstream parties are reshaping the concept of Europe.

Eastern Europe is drifting apart. Despite a rough patch during the Great Recession, Eastern European nations—especially those that leveraged the economic and political opportunities—benefitted greatly from joining the European Union in 2004. But in some of the most successful economies, the voters were barely aware of the European elections. Less than a quarter of Polish voters showed up. In the Czech Republic and Slovakia, participation rates were in the teens.

This disconnection of Eastern European voters from the European Commission in Brussels and the Parliament in Strasbourg is mirrored in the disinterest of their leaders in the Frankfurt-based European Central Bank. Marek Belka, the governor of the Polish Central Bank, has reiterated that Poland will not join the euro anytime soon. He has also complained that the so-called “Banking Union” will discriminate against non-Euro members. The Czech Republic has similarly distanced itself from Frankfurt.

On the Eurozone’s economic periphery, the Italian Prime Minister Matteo Renzi’s success in the European elections is viewed as a vote for reform. But a stronger Renzi does not help European integration—instead, a more robust confrontation among eurozone members is likely. The previous batch of Members of Parliament voted along national lines on key economic issues: those from the core favored more national budget discipline while the periphery sought financial relief through such mechanisms as Eurobonds. A vote for Renzi will reinforce his demands for greater fiscal latitude from Europe, which will only deepen distrust.

As these centrifugal forces strengthen, the mainstream parties are playing defense against the extremists. Having reflected on his loss two years ago to President Francois Hollande, the former French President Nicolas Sarkozy has called for a fundamental rethinking of Europe. He wants to draw new lines separating countries into inner and outer circles, repatriate “competencies” from Brussels back to national capitals and dangerously restrict the movement of people across borders.

While Prime Minister David Cameron of the United Kingdom and Chancellor Angela Merkel of Germany have raised concerns about absorbing migrants into their countries, Sarkozy has called for an immediate suspension of the Schengen area, which grants the right of free movement of people across most of Europe. Without the free movement, integration has no meaning—the very essence of what Europe stands for is undercut. And the flawed euro project would be further undermined.

The “falling forward” view promises change at the end of a hazy, muddled-through process. Some had speculated that voters would see through that haze and rally around the prospect that the leader of the winning party in these elections would also be the next president of the European Commission. The voters discounted both the likelihood and the value of that outcome—rightly, it appears, in view of the post-election political jockeying. The European Parliamentary elections remind us that voters primarily care about their pocket books. The emerging fault lines along national interests are an expression of despair. They reflect economic distress for many, the burden of relentless fiscal austerity on the weakest and the divergence of economic prospects across countries. Unable to respond constructively, the politics is beginning to mirror the economics, leaving the voters with few options to create positive momentum. Rather than “falling forward,” the deepening fault lines could crack European solidarity and irretrievably undo the gains so painstakingly achieved.

Wise counsel requires preemptive action to prevent the political muddle from morphing into an unmanageable political crisis. While preserving longer-term European goals, particularly free movement, considered decentralization from Brussels is needed to defuse a collision of national interests. A key step would be to downsize the elaborate and ineffective central fiscal surveillance framework, let countries assume greater responsibility of their fiscal policies and allow markets to deal with the risks of lending to errant sovereigns.

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  1. James Dodson JR

    When I worked for a small IT company in the early 2000’s .My boss and me talked about the Euro .He said it would not last past 10 or 15 years. I have to admit he is right the Euro will fail.

  2. Roland

    Why does the EU need a permanent integrating trend?

    If the EU is a robust and healthy federation, it should be able to survive considerable periods–even whole generations–during which a decentralizing trend predominates.

    Consider a real federation such as Canada. In Canadian history, there have been centralizing periods and decentralizing periods. The federation survives through both.

    Another thing to bear in mind is that there is not just one way to integrate Europe. Whenever Europeans face the question of integration, they must ask themselves “whose sort of integration are we pursuing?”

    I would say that the neoliberal type of integration that the EU has favoured since the 1990’s needs a serious re-think. Some renationalization of powers is in order.

    If the EU is a one-way street of permanent maximizing integration, then it will be doomed by that sort of hidebound and unadaptive tendency.

    1. Moneta

      Canada is way more homogenous than Europe. Furthermore, we do transfer payments from one province to the other to create some measure of equality. And even then it’s tough. Our government is putting huge emphasis on resource development which is benefiting an Alberta who does not want to share and is quite angry when it is forced to.

      I don`t think Germany will do the same type of transfer payments to Greece…

    2. Alberto

      Canada is one of the few rich countries which is an energy and cereals net exporter. Europe imports 85% of energy and agriculture was and still is one of the worst managed sectors in an already horrid continental management scheme. I don’t believe that what we’re seeing is the real thing. This is intentional: some countries which could be potential competitors for the residual fossil energy supplies are intentionally weakened. Europe is a continent which condemned itself to war many times. It’s going to happen again.

      1. Tsigantes

        There is no doubt by now that Greece has been intentionally weakened through austerity: apart from energy deposits in the sea bed, gold, silver, unexploited rare earth and rare minerals, it is geo-strategically important to Europe as its southeastern frontier with both Asia and Africa, with deep natural harbours (USA still maintains its base at Souda Bay) and with strong, tested, politically neutral ties with the eastern and southern mediterranean littoral nations.

        Not to mention the haircut Greek banks which, as conservative shipping based banks sailed through the 2008 crisis untouched. Unlike the northern European banks they were 70% deposits and 30% investment, mostly in value sectors like shipbuilding. Before the 45% haircut these were a national asset. They are now zombies.

        Of course pointing out even a few of Greece’s strengths / value invites a storm of derision from TPTB.

        A detail: the price of joining the EU was to shut down its huge tobacco industry. Greece has the only suitable conditions for tobacco-growing in Europe with a long established international trade: 60% of Marlboro cigarettes were greek tobacco pre-EU, for example. This was not because the EU was anti-tobacco but a concession demanded by Italy which wanted to have a tobacco monopoly. Being forced to open its economy on accession also meant that protected high quality sectors such as textiles and ceramics could not compete with cheap Asian imports.

  3. Crt J

    “But in some of the most successful economies, the voters were barely aware of the European elections. Less than a quarter of Polish voters showed up. In the Czech Republic and Slovakia, participation rates were in the teens.”

    Hey. I’m from one of the ex-socialist countries, Slovenia, which was not mentioned above (maybe because the economy is not really among the most successful) but had a similarly low turnout.

    It’s not that people are not aware of the EU elections. It’s more a sense of general disillusionment. The election candidates can easily be seen as a bunch politicians that have reached the end of their shelf-life locally and are trying to transport themselves to greener pa$tures.

    Also, the feelings toward EU itself are a mixed bag of signals. This in itself is not unusual; it’s just “unexpected” – in the sense that expectations of what the membership would bring were abnormally high and even seemed justified for a while when the signup bonus appeared to be super-easy credit. When the turn of the wheel came most people were extremely unprepared for it, meaning business and political leaders as well as “the little guy”. And we’re still at the lows today, just starting to show tentative signs of life.

    So, economically, EU membership was accompanied by a textbook boom and bust cycle; but the awareness of economics textbooks is low around here despite high levels of formal education. There has simply not been enough first hand experience of such swings. And it’s too easy to think that you’re simply a favorite of the gods, today and forever, when it’s raining money.

    A rude awakening followed, accompanied by the usual Kubler-Ross progression which is moving forward veeery slowly. It is not really unthinkable that mainstream politics would eventually turn in a direction away from the EU. (Snake, coiled rope etc; or, casting the blame on the outsider rather than facing the mirror).

    All these things are straightforward and could, I believe, be said of many countries on the EU’s southern-ish flank.

    Now what?

    A number of people think that it is important to stay in the EU for political reasons. I’m among them but I’m not really sure that we’re the majority. The idea is that it is politically good for our small boat to be tied to the EU supertanker because, if left alone in the ocean, it would get nowehere and would also perform lots of creative experiments while getting there. Experiments with little disregards for personal property, freedom and life, such as were already experienced in these parts of the world (and too many other parts, of course). Looking only inside Europe, it’s not just us – even Spain, Portugal and Greece were dictatorships not so very long ago. (And then there’s the German experience.)

    My main worry is that our position is precarious. Casting a public voice for the EU is all fine and dandy if the EU is there to stay. If not – then we’ll be seen as unpatriotic, allies of the evil foreigners, prime fodder for the tribes tearing up the land, nominally competing but united in their hatred of the “ones that do not belong”. Sadly, I don’t really agree that electing a bunch of hopeless guys seeking a better paycheck will help to avoid this.

    1. digi_owl

      Another issue is that parliament can be seen as a “lame duck”.

      It may yay or nay a directive, but it is the commission (every damn time i read or type that i think of a mafia “commission”) that is the author.

      And while the commission is technically picked by the elected heads of state of the EU nations, it still has the air of a old boys club.

      1. Nathanael

        The powerlessness of the European Parliament is one of the things which prevents the EU from having any legitimacy. The Commission has been considered illegitimate for at least 20 years — I was reading about that back in 1994.

        1. Tsigantes

          And even now, though infinitely better than the ‘nothing’ before, it has only just been accorded one power: the power of veto.

  4. Podargus

    Why is freedom of movement such a must have?
    I’m sure it’s nice and convenient for the cafe class to zot across borders for a dirty weekend in wherever.Likewise the tourist plague. But it is not quite so nice for the native working class to be inundated with immigrants who will happily toil for low pay.
    The nation and the natives have priority.This whole silly experiment needs to be terminated sooner rather than later.

    1. bmeisen

      “…let markets deal with the risks of lending to errant sovereigns.”

      ha ha ha, like letting markets deal with the risks of lending to people who have no job, no income, no way to repay. this sounds like japan all over again – please do what brilliant americans say, not what they do. The periphery argument reads like the pseudo-causality of stock market sound bites: “New employment numbers sent the market down today.” The Finns are closer to Siberia than to Frankfurt.

      The Poles and Czecks are well-advised to keep away from the emu – east Germany has a degree of social stability thanks to a massive and ongoing transfer of wealth from west Germany – the Solidarity Tax, paid by west Germans – as well as thorough infrastructure renewal, funded by the German federation with a little help from the EU. A truly vast redistribution of wealth, arguably the horde from Germany’s trade surplus, has prevented east Germans from violently rejecting re-union with the west. The Poles and Czecks don’t have the resources to rebuild thir economies, the EU couldn’t fund it, nor could western investors even though gsax and co have probably been selling them incessantly.

      1. bmeisen

        @podargus – enjoy picking those tomatoes! and you can always make some extra cash cleaning houses.

      2. Tsigantes

        “…let markets deal with the risks of lending to errant sovereigns.”

        Exactly – at least when you have your own currency you can print and lend to yourself.

    2. Moneta

      Because then the incumbents don’t have to change anything. They can cling to their goodies and look down on the gypsies.

    3. StreetEYE

      In the USA, if Detroit’s economy is in the tank, and North Dakota’s is strong, people move from Detroit to take $17/hour jobs at Walmart in North Dakota. They pay Federal taxes, which helps pay benefits for people in Detroit.

      In the old Europe, pre-euro, if Italy’s economy tanks while Germany is strong, Italy devalues the lira.

      If Italy’s economy tanks, and they are in the euro, they have no independent monetary, or currency policy, or even fiscal policy due to fiscal compact, deficit limits, inability to borrow in their own currency, and people can’t even work across the border in Germany or in London where there is labor demand, then politically, it’s hard to maintain the euro.

      Unless the economy is integrated and has a convergence dynamic, eventually euro-area interest rate, FX policy is right for one area (probably the one that has political power) and totally wrong for another area.

      1. Lambert Strether

        “They pay Federal taxes, which helps pay benefits for people in Detroit.” No, they don’t. Federal taxes do not fund Federal spending. They may pay state taxes, which will help the people in ND (not such a bad thing).

  5. Andrew

    It’s not news to say things are going badly in the EU. But a big problem w/ commentary coming from the US is a repeated reference to something called “Europe” or even the EU. I’ve lived in the Netherlands for about 10 years and through friends and family have spent a considerable amount of time in Spain as well. There’s no sense among Europeans that they live in a place called “Europe”; rather, they live in France, Belgium, etc. And among the Dutch or the Spanish there’s little or no discussion that things are going badly in the EU–not really; there’s only a sense of how things are going in the Netherlands and in Spain. Even though treaties, economic agreements, the ECB and the IMF directly affect people’s lives and severely limit sovereignty, there’s little consciousness of this, and absolutely no sense of the notion that the problems in places like Greece and Portugal are connected to the benefits and woes of places like the Netherlands, Germany, or Belgium. Thinking remains very parochial, very confined to the nation (except in Germany where they’re propagandized about the lazy freeloaders and corrupt scum in southern countries). These popular perceptions matter because if and when the EU breaks up it will have to be from a popular movement. The Troika is for the most part happy with the way things are going, so they’re not going to do it, and they run the show. As many on this site have argued, an EU breakup, if accompanied by smart and appropriate national legislation, could be great for the populations of Spain, Greece, etc, and maybe not so great for the banks and the Troika. Unfortunately, voter cynicism and low turnout, as well as some extreme parties, don’t indicate that that’s going to happen–no more (and no less) than low voter turnout and the Tea Party indicate a breakup of the two party duopoly in the US. As usual, one one side you have a desperate and fragile tiny minority with tremendous wealth, media outlets, a monopoly on violence, and mostly capture of legislation; on the other we have the moral right, logic, the vast majority of people, popular opinion, and a few legislators and weak organizations. We need mass organizations and movement building; until we have that, I’m afraid we’re stuck with the EU and with the Repos and Demis in the US.

    1. digi_owl

      Best i can tell, this depends on the “class” the person and their family belongs to.

      The academics and higher educated technical workers seems more and more apt at seeing themselves as “european”, with the passport being a “flag of convenience”. This because they can more easily move across borders and still work on what ever projects they are attached to. And i think this is why the EU big wigs recently took a interest in mobile roaming charges, as easy access to internet connectivity is vital to these groups.

      But traditional workers are more location locked to factories, farms, and similar.

      These are the ones voting “extremist”, as they see their wages and such eroded by project hires from elsewhere that show up, make a racket, and then leave.

      Recently i came across a story about a US coal miners strike that ended up with virtual civil war (the state militia/national guard ended up being called in and everything). This because the mining companies started using convicts as forced labor to boost profits, displacing the miners that may have been working there for multiple generations.

      1. digi_owl

        Ugh, hit submit a bit soon. What i meant by the last part is that right now project hires coming by the bus load across national borders in Europe is very close to the convicts situation in that it is disrupting the predictability of life for industrial workers.

  6. John

    A few weeks ago I would have said a break up would be in the cards, but what is developing now is more of the status quo — there is no alternative (TINA). Breaking up is such a hard thing to do even when it means squeezing blood out of a stone. Look at what has in the past few weeks. Lithuania has signed onto the euro, Moldova, Ukraine, and Georgia have signed up for the Association Agenda agreements. When national leaders that leaned towards EU reforms (Italy, Holland, UK, Hungary) had a chance to voice their reformist message this past Friday, only two voted, UK & Hungary, against Juncker, the ultimate Federalist.

    The UK made the loudest noise on EU reforms and failed miserably in swaying change. I just don’t see any chance of a breakup in the near term. Sure, the UK will eventually drift away but the EU bloc as a whole are standing firm in their belief in the European Union and single currency. Their roots are deep. Many of us eurosceptics, like myself, must come to grips with this.

    However, breaking-up at the national level is another story for some countries and there is a good chance, Belgium, Catalonia and Scotland may actually spit from their current political form soon.

    Here in Belgium the nationalists won a large majority but have failed thus far to build a center-right coalition to form a government. The Walloons are spooked at the prospect of the country breaking apart so they have pulled out all the stops to trip up the nationalists at the negotiating table. Needless to say Belgian politics is very complicated.

  7. Swedish Lex

    European integration has indeed been moving ahead by “falling forward” in times of crisis. Many, including myself, expected the same to happen 2009/10, but instead the EU is disintegrating step by step.

    20 years ago, there was a broad support for EU integration among citizens in Europe. People put the European flag on stickers, on t-shirts and the European youth was 100% supportive. Former WP countries saw a bright future inside the EU. All that has been shattered.

    The EU states now have to decide whether they want to keep the euro or not. If yes, the inevitable consequence is moving ahead towards an embryonic federal state. But nobody seems to want this, in which case the euro should be broken up.

    I am old enough to remember the bad old days without real freedoom of movement and the petty protectionism between the EU states that overall resulted in a balkanised economy. Add a Le Pen here and a micro Moussolini there, and we are soon back to normal, i.e. the tribal wars that have dominated Europe for the past thousands of years. People currently seem to take peaceful coexistence between the European nations for granted. Nothing could be more errouneous.

  8. John

    Folks who are thinking an EU breakup is inevitable should consider who was voted in as EU President this past Friday. Their ‘man’ from Luxembourg (former prime minister) is Mr Taxhaven, an insider to fight in defense of of tax havens.

    An EU breakup is not in the cards. Taking tax money from the US is just too easy.

    1. Swedish Lex

      A “breakup” does not have to be a big bang thing.
      Some countries may indeed leave, like the UK, but a breakup could also be achieved by gutting the EU of its substance.
      Pretty much all legislation in the EU to protect the environment comes from the EU. The more progressive states have generally had the upper hand. The European Commission and the European Parliament have generally been fairly green. That Member States do not always live up to these standards is a slightly other matter. Break up the EU, and some countries will stall completely and environmental protection will start going backwards in several countries.

    2. Jose

      The periphery nations, in spite of their ordeal under the euro, seem too obedient to ever break away.

      But the UK may soon leave.

      And there’s a chance that France could one day elect a parliament where anti-euro groups from the right and the left have the upper hand.

      A eurosceptic government in the second most important member of the EU and the euro – that would be l’événement, the earthquake capable of producing the ultimate unraveling of the Monetary Union.

      Stay tuned.

  9. lakewoebegoner

    though i think that the EU is a rolling train wreck, i disagree and think that it’ll stay cobbled together for at least another decade by a German sense of “noblesse oblige”/WWII guilt and EU development grants to Southern/Eastern Europe.

    But definites—-UK leaving the EU (perhaps eventually joining NAFTA/turning into “Airstrip One”?) and the pro-EU Liberal Democrats is done as a national party.

    1. Moneta

      I’m not sure. I think it depends on whether we have another credit crisis or not. And I believe we will… I’m looking at the junk bond market which investors are using as a treasury alternative and I know it’s a question of time. Equities are going up amid an erosion of balance sheet quality. Companies are taking on debt to increase dividends and the market loves it. A large % of investors are going index without doing their homework and securities are getting totally mispriced.

      In the last credit crisis, most governments had decent balance sheets with debt-to-gdp<60% and rates could still be cut. This time however, central bankers can't lower rates so they'll have to print but they are already at 100%+ debt-to-gdp… this means for many countries, default will look attractive and when enough countries do it, then many will be better off having their own currency and printing.

      Is all of this going to take a decade? I don't think so. These cycles seem to last 5-8 years and we are in year 6. I am expecting the bond bubble to burst within 1-2 years. Right now we are in a lull but I think we are closer than most think.

      Maybe the exits can take a decade, but something tells me that if there is a credit crisis and countries need to print, the exit will be much faster.

      1. William C

        I am less sure about the UK leaving.
        Recent opinion polls in the UK now show more in support of staying than going out of the EU.
        The most likely scenarios in the next few years are:
        A. The Conservatives form the next government in 2015 and hold a referendum in 2017 urging the people to stay in, backed by big business, who also want to stay in. Most likely in that case is a vote to stay in.
        B. Labour form the next government in 2015 on a platform that excludes a referendum. If they stay untll 2020 that would probably mean no referendum before 2022 by which time who knows what the position will be.

        The polls show generational differences, with the old wanting to leave and the young wanting to stay. So may be the eurosceptics will slowly fade away.

        I saw one old boy interviewed who is a eurosceptic who essentially wanted to return to the days of the British Empire, though he did not put it in exactly those terms. He did not say how this should be achieved – start by reconquering Ireland and then move on from there perhaps? Hopefully his vision will not be realised.

        1. susan the other

          Living without an emperor is just such an impersonal existence. The new emperor doesn’t need clothes because it is merely an accounting system that continuously provides money to the rich and the already advantaged. In the old days, most emperors and kings suffered hard times along with the nobility and the serfs, who could at least grow a garden and spin a few itchy rags to wear. Well, with the exception of guys like crazy Ludwig and Vlad the Impaler. The mindset of empire runs deep in Europe. At least it was a hierarcy of responsibility. Today? No politician does so much as one damn thing to make life better.

          1. susan the other

            Last nite on France24 the interview discussed Juncker, the Federalist, heading up the EU Parliament. David Cameron’s little protest theater was looked at and dismissed as somewhat irrational because Europe barely tolerates him (they like Cameron only slightly better than they like Timmy Geithner) and certainly it is not going to get stuck again by loose British banking. So clearly Britain is outa there already. It probably won’t take long. To me it looks like Europe is determined to stay together. But one commenter said that the dissatisfaction among most Europeans is a serious threat to the EU and it must be addressed. Politicians do nothing except strut around in photo ops, smiling and gesturing like tourists, and the people are sick of it. Gosh, I think I know that feeling.

        2. Moneta

          There’s the EU and then the Euro. The UK can control its printing, not France and Co. Big difference.

          1. susan the other

            I think that’s what I mean. The EU was invented to justify the euro. But it’s not doing a very good job so far especially since it was bushwhacked severely by the GFC when it got involved in all those rehypothecation technniques perfected on Canary Wharf. Not that the EU banks are innocent, just embarrassed.

    2. Nathanael

      I can believe another decade — or even longer. But I think the EU will be *effectively* destroyed before then.

      Look at how long the Holy Roman Empire lasted. And look at how meaningless it was for much of that time.

  10. lakewoebegoner

    and as an aside, the evolution of the EU should be a cautionary morality play to the American liberals/left/progressives/whatever-the-next-label-will-be.

    ambitious, well-intentioned government project to foster peace and prosperity through trade and freedom of movement gets co-opted by the moneyed class and a well-entrenched, nominally democratic bureaucracy at the expense of the wages of bottom 95% of the developed members of the EU.

  11. impermanence

    “Parliamentary elections remind us that voters primarily care about their pocket books.”

    Elections simply define who is the most believable liar, nothing more.

    Understand money and the Euro makes perfect sense to those whose main objective was the financialization of Europe, on the one hand, and continued downward pressure on wages, on the other. The Euro has been quite instructive in allowing those [willing to take off their blinders] to see how money, when substituted for labor-value itself, controls all processes.

    Money, like most human constructs, has its positive applications, but, on the whole, it is a sinister tool used to exploit, steal, defraud, cheat, and otherwise create havoc on this planet.

  12. alex morfesis

    referendum vs confirmation

    the “euro crisis” came along just in time to deal with the little problem that when allowed to vote, the average European voted to not integrate…so…one had to “fix” the problem.

    this make believe financial crisis is to illicit submission in return for some sustenance and nourishment.

    we don’t have to force you. you can choose to starve or you can submit.

    greece and portugal were targeted as they have immature financial industries. For every greek financial institution per capita germany has ten, creating competition and a broader market for financial products. So she was an easy target, as there is NO, ZERO, NADA, none…no financial news information in greece, heck they didn’t even have a proper tax planning book for sale when I was looking to live there in 2005-6. The myth of needing 50 people to sign off before you can start a business is a vast lie. Although technically one could go a route to cover all possible bases, the reality is that it is easier to just move forward and have the plutocrats make you pay a fine for moving without the full and proper permits. In fact, almost everyone in greece knows which permits are really needed and which are just an excuse for a tax. The euro will not come apart as there are too many derivative contracts tied to it for there to be any such possibility. I wish the euro could and would go away, but there are too many opaque agreements between all the major financial players for there to be any possibility of unwinding of those contracts.

  13. Irrational

    Apology for long post
    The EU (or rather its pre-decessor the European Economic Community) was created above all in response to WWII, to prefer political cooperation to political competition and thereby preventing another war.
    The US supported this and indeed helped Europe overcome the first post-war political gridlock with the Marshall Plan.
    Since then, the EU has weathered many storms. Some policies have been right, some have been wrong. I think this happens everywhere. However, since 2008 the EU – like the rest of the world – faces a protracted downturn and we see that while it is easy to divide the pie when it is growing, it gets a lot harder when it is shrinking and therefore the handling of the crisis has been sub-optimal to put it diplomatically as there has been a lack of vision of what is in the EU’s interest as a whole and not in the interest of each nation state.
    However, the European Commission (or “Brussels”) cannot on its own comes up with new ideas to grab power. In all cases, the member states must agree and in many cases now the European Parliament. That means that when some countries bemoan a power grab by Brussels, it is rather disingenuous and sometimes they have even voted for this policy themselves!
    The EU has brought us a lot of good things and, yes, freedom of movement is one of them. It does not only mean in terms of labour mobility which is a recent priority. Initially, the focus was squarely on goods, i.e. free trade. It enables Europeans to buy products from other countries wihtout prohibitive tariffs. In terms of scale, not having free movement would be comparable to having border posts and extensive controls between individual US states.
    Sadly, though, and I think this is a major reason why UK voters are so disenchanted with the EU, most UK citizens do not get to experience these benefits simply because the UK is an island. This means you must have border controls and customs while the rest of Europe merrily crosses borders as they please (within the Schengen area, where countries have agreed that each others border controls are up to scratch). Gone are the times where you wait endless hours to cross borders and you must retrieve your packages from abroad after endless customs processing. There are some real advantages there, especially if you live in a small country where your needs may not be met by the local shops (also less applicable to the UK of course).
    However, the EU has – aided and abetted by member states – been overambitious in some policy areas and it would be good – as it would at the level of every nation – to review laws periodically for appropriateness/outdatedness.
    Whether Jean-Claude Juncker is the right man for the job, we shall have to see, but at least he has a sound perception of the interest of Europe as a whole and knows the art of compromise. This will be helpful to get the EU back to the basics of building on common views rather than focusing solely on disagreements and exacerbating them. If we do not manage that, then we will fail indeed.

  14. Podargus

    An “Irrational” apologist for the EU/EMU – self interest will always out itself.

  15. Francesco

    An energy crisis is in the making. Conventional oil peaked in 2006, all the incremental oil growth from 2008 is from north America where more and more wells are necessary to replace the fast depleting less recent wells. Latest data from Bakken tell that legacy decline is 78% of the new production. Global peak oil is really a few years from now, while financial markets and all media pundits are expecting oil production to grow so fast to have oil back to 70 $ a barrel or less. This is crazy. It’s known that Europe depends on Russia for natural gas but there are less comments about the sad truth that Europe depends on russian oil even more and there is no replacement for that at any price. Russian oil is peaking, all their giant fields are heavily pressurized, a signal that they are in terminal state. All the real experts I know, think that russians will not be able to export 10 million barrels/day within this decade. At the same time, new pipelines are going to be built toward China. In a decade the euro will be no more than a ripple in an ocean of pain. Most of Europe will be like Kossovo today before 2030, is an easy bet but without someone who can pay for it. The US will follow, it’s only a matter of velocity.

      1. Francesco

        Solar is worthless for transportation where liquid fuels cannot be replaced. Electric vehicles have a bright future for low weight, low mileage itineraries within the metropolitan areas but they can’t be massively charged by solar panels. Today solar is providing about 1% of world global energy, it will never be able to replace the huge power we obtaining with fossil fuels and solar panels factories work burning coal; you also need a gargantuan amount of fossil fuels to transport and install them in your home . But we don’t need all that energy to keep a high level of civilisation, just not this one, which requires endless economic growth which requires endless energy supply growth which is impossibile. The financial system will collapse sooner than later because it’s the weaker ring of the chain. The problem is that we bet all on it, so we are going toward the biggest crisis since the eruption of the Toba volcano 70k years ago.

  16. Kraken

    The Eurozone should break up but it won’t. It is not in the interests of the US to do so. As should be readily apparent by now, European countries are vassals of the US empire. Witness Europe’s actions so far in this Ukraine crisis. They so far appear to be willing to sacrifice what’s left of their economies by supporting the Hegemon’s efforts to dismember Russia. Being on the Euro removes a country’s sovreignity. This is the hidden agenda behind the common currency, and an integral part of the coming NWO. Democracy and socialism are gone forever. We are entering in new stage of historical development. The people of Europe should hasten to recognize that the “uni-polar world has failed. They should support the Eur-Asian alliance between Russia, China and the other BRICS. What a sad irony it is that the future of the planet depends on reducing the global power of the “shining city on a hill”.

    1. Tsigantes

      The EU will not break apart right now, based on where we stand now, despite current misery and disunion, but it will if the stress increases. Most likely into blocs and most likely, unfortunately, the trigger will be political in origin.

      Except for the recent enlargement, the first 17 countries signed up to a trade zone, nothing more. A trade zone was comfortable for all players and worked. And the reality is that the EU remains an artificial construct (like the UN) to which we are committed economically and legally – but only up to a certain degree and no further. A construct to which we paid polite lip service, and enjoyed for its convenience (at best), but which engendered no fundamental loyalty. As a union whose logic was already fraying around the edges with the inclusion of the Warsaw Pact countries under unequal terms, Turkey’s application, the new condition of NATO membership etc…ie where was the natural limit or logic?

      Pressure for ‘ever closer union’ absolutely does not come from the nations. It comes out of Brussels, on the back of the euro / eurozone crisis, and is extremely recent: the last 2-3 years. Even now it is not being openly debated, only implied. And reinforced by Brussels’ complete refusal to consider alternative solutions.

      In terms of solving the eurocrisis and from the nation/populations point of view it’s a discussion we don’t need to have and a wholly invented problem. So in this sense, Europe as represented by Brussels and TPTB (we can guess but it is not entirely clear yet who ‘they’ are) is – pace the title of the article – taking PERFECT advantage of the crisis to advance its political agenda, which turns out to be its core agenda.

      Ever-closer-Union is essentially a political TINA, presented – rather, intimated – by Brussels as an inevitable pre-condition to solving the eurocrisis, by implying (though never stating, please note) that a federal ‘state’ can make federal transfers. Just think about that for a moment. Ancient nation-states are expected to 100% surrender their sovereignty, in perpetuity, as a PRE-CONDITION to finding an economic solution to a mal-designed currency union. As framed by the federalists in Brussels, and reinforced by their complete refusal to entertain other options, it is that, or break-up.

      Never mind that several fully worked out economic solutions are available and immediately applicable, within the terms of the present treaties, and without further transfer of sovereignty. The Modest Proposal, as featured on this site, for one. If Brussels IS forced to opt for one of these, mark my words: it will opt for the worst ‘solution’ possible to keep the federalist aspiration alive.

      The European Union as a federal state of 27 ‘regions’ is a wholly federalist fantasy that no EU nation has ever wanted, proposed or backed. That it has been quietly pursued all this while has only been revealed by the crisis, primarily by the absolute refusal / non-will for positive solution & using the excuse of a spiderweb of rules which can apparently never be broken. Thus we discover that Federalism has been coming into nascent legal form through a stealthy step-by-step institutional sovereignty-poaching at commission level aimed toward gradual fait accompli. At present the federalists blame the Eurogroup (nation-states) for prolongation of the crisis while promoting Ever-closer-Union as sole alternative. So the narrative is Bad Eurogroup vs Good Commission, and the countries supposedly dividing into good idealistic Ever-Closer-Unionists vs bad, selfish Trade Bloc-ers.

      Ukraine has placed the improbability of true political union under an emergency spotlight. The European union CAN succeed as a trade bloc, and perhaps as a (corrected) currency bloc, and even as a very loose political alliance respecting core geo-strategic differences. But the contradictory geostratehic realities and historic links uncovered by Ukraine reveals strong political limits. The ex-Warsaw nations’ visceral reaction to US-Ukraine-Russia is not shared, and runs counter to, say, Mediterranean historic links and ties to Russia, for example with Greece / Cyprus. It also runs counter to a large number of countries distinct wish not to antagonise Russia – not through fear – but through lack of any reason to do so and since the obvious cultural, historical and economic way forward is to work with Russia.

      Apologies for the long comment!

  17. The one thing about EU you are all missing

    The tide turned against the east-Ukrainian separatists when Rinat Akhmetov (local industrial tycoon) who owns most of the industry took his stand against a divided Ukraine. He practically single-handedly dismatled the barricades in Donetsk. None of the politicians in Kiev could have done it. His motive ? Fear of damage to his export industry through being shut out of international markets.

    No matter what looney-bin nationalist politicians and their supporters want, you will not find any businesses / business leaders in Europe that advocate the separation of EU and abandoning the Euro. Nobody, and I do mean nobody, that does any kind of export business wants to see the return to ‘the old europe’. The constant din of anti-euro commentary from the US and UK never touches on this issue.

    When push comes to shove, you think Siemens, PSA, Airbus, VAG or this likes are interested in setting the clock back a few decades ? You bet your bottom dollar they ain’t. Nationalist sympathisers with populist agendas cater to the losers, everyone knows it. The people with actual salaried jobs are not interested in a divided europe.

    Find _one_ significant european business leader that is against the EU. ( UK looneybins that operate in what is essentially a domestic market are not counted).

    1. Tsigantes

      You know what? This is NOT an either-or issue. There is absolutely ZERO need to set the clock back several decades, just as there is zero need for political union and a federal state. There is no need for the continuation of the current economic crisis either: the answers are there, ready to use, without changing any part of the treaties. So refusing to even discuss a middle ground, and framing every question as political or economic TINA is simply a modus to advance an agenda.

      And you are just another standard-issue TINA agenda-advancer.

  18. Ignacio

    This are some excerpts from de 2013 december eurobarometer:

    Number one:
    Attachment to the European Union is unchanged since the Standard Eurobarometer survey of spring 2012: 46% of Europeans are attached to the European Union, versus 52% who are “not attached” to it. The proportion of Europeans who are “very attached” to the EU (9%, +1 percentage point) is still lower than the proportion who are “not at all attached” to it (16%, +1).

    Readers will recall that attachment to the European Union decreased sharply between the
    spring 2010 survey (EB73) and the spring 2012 survey (EB77), becoming the minority
    position (46%, -7 percentage points, versus 52%, +7).

    Number two:
    Freedom of movement is seen as the most positive result of the EU in 22 Member States, including Belgium where it is ranked equally with peace (54%). Freedom of movement was mentioned by more than 70% of respondents in Slovakia (75%, unchanged), Bulgaria (74%, -2 percentage points), Latvia (72%, +2), Lithuania
    (72%, +2) and Croatia (71%, -1). It was mentioned more frequently than in spring 2013 in Finland (60%, +9 percentage points) and Spain (62%, +8).

    So, If Sarko and others push to restrict movement, this will almost certainly be a steep step forward disintegration.

  19. JerseyJeffersonian

    Interesting account of the secretive US involvement in the all-important conceptual phase leading to the creation of the common currency project for Europe that eventuated in the Euro, by design subservient to the policy aims of the US, and corrosive to the sovereignty of European nations.

    Notes: 1) The link to the facsimile of the document in question can be found in footnote #7 at the bottom of the post; 2) Note well the common thread running through the work of several of the American diplomats, namely engineered regime change by whatever means necessary. I particularly noted the ending year of service in Chile for #3, Deane Roesch Hinton, 1973, the year of the fascist coup against President Salvador Allende. Mission accomplished, time to move on…

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