EU Officials Out Of Step With Reality, Europeans Don’t See What’s Coming at Them

By: John_Mauldin

BY GEORGE FRIEDMAN : Imagine the following scenario.

Texas votes to secede from the United States, sparking bitter tension between Austin and Washington. A neo-Nazi party wins seats in the California legislature.

Cook County, home to Chicago, threatens to break away from Illinois to form its own state. Worried about losing such an economically vibrant region, government officials try to prevent the election from taking place.

The federal government vows to suspend North Carolina’s voting rights in Congress simply because it didn’t approve of its behavior. It considers doing likewise for Arizona.

In such a scenario, you might conclude that something is terribly wrong with the United States.

The thing is, this is pretty much what is happening in Europe.

The European Union in Shambles

The United Kingdom has voted to leave the European Union. The negotiations over its departure are unpleasant, to put it mildly. A party, whose members are compared to neo-Nazis, has won a surprising number of seats in Germany’s parliament.

Catalonia—which is home to Barcelona, a large and economically vital city in Spain—held an independence referendum October 1, something the government in Madrid has tried to stop. And the European Commission has threatened to suspend Poland’s voting rights over actions taken by the Polish government. It has previously attacked the Hungarian government for similar reasons.

Putting Europe in Perspective

This is not meant to diminish the problems of the United States. Nor is it meant to imply that the problems of the US and Europe are alike. I simply want to put Europe in perspective.

For all its problems, the United States isn’t about to lose its second-largest economy. It isn’t revoking voting rights from state legislatures. It isn’t grappling with a legitimate secessionist movement. It doesn’t have bona fide neo-Nazis winning seats in its largest and most prosperous state.

It may be a tough time to be American, but it is an especially tough time to be European.

But as I discovered last week in Europe, this is not how European officials see the situation. They regard the problems as serious but not existential. They believe these problems can be managed and point to economic growth in several of its member states as evidence of their management.

European officials believe the secession of the second-largest economy in Europe can be handled by a reasonable accommodation. The threat to Poland is simply the attempt to rectify a problem there.

They think the rise of the racist right from street demonstrators to significant parties is unfortunate, but not symptomatic of any larger issue. That the desire of a major part of a constituent member to form a new country is a local problem that will be handled by Madrid. 

An Odd Tranquillity

At its inception, the EU may have had political ends—it bound France and Germany together to keep them from going to war. But it is fundamentally an economic organization that is built on the notion that humans are primarily economic creatures.

The political upheavals of Europe are secondary and actually irrelevant to the real issue—making money. This is why the EU measures success in economic terms.

And it’s understandable why Europe would do so.

War and politics have defined the economic fate of its nations. World War I, World War II, and the Cold War had more impact on Europe, and indeed on Europe’s economy, than purely economic forces like supply and demand.

The dangers of political violence are well understood there. If Europe can marginalize political upheaval and concentrate on prosperity, then perhaps it can at least ignore the political and military ghosts that haunt it.

In other words, it can manage political disaffection so long as it prospers.

The problem, of course, is that prosperity was imperiled in 2008. The pride Brussels has in 2% economic growth (in some countries), and its belief that the EU has turned a corner because of it, ignores nine years of economic duress.

It also ignores the political fallout of that duress. Welcome though 2% growth may be, it might be too modest for patching up the long-term political wounds inflicted by the 2008 financial crisis. 

In contrast with the Americans, who tend to overstate their problems, Europeans tend to understate theirs. It may well be that European leaders see things more clearly than I do. But I don’t think so. I see a pattern of disintegration that requires the energy generated by panic if it is to be solved. 

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