For Europe, it doesn’t get better

By John Lloyd
April 4, 2012

The European crisis isn’t over until the First Lady pays, and the First Lady of Europe, Angela Merkel, cannot pay enough. She needs to erect a large enough firewall to ensure that the European Union’s weaker members do not, again, face financial disaster. That will not happen – which means the euro faces at least defections, and perhaps destruction.

The crisis had seemed to recede somewhat in early 2012, and the headline writers moved on. But it had only seemed to recede, and relaxation was premature. As Hugo Dixon of Reuters’ Breaking Views put it on Monday, “the risk is that, as the short-term funding pressure comes off, governments’ determination to push through unpopular reforms will flag. If that happens, the time that has been bought will be wasted – and, when crisis rears its ugly head again, the authorities won’t have the tools to fight it.”

But the underlying tension remains between high indebtedness in nearly all the EU countries and the need to pare back public spending without suffocating the economies. The flat, or negative, growth lines in the same countries that are indebted are likely to be made worse as demand falls and a malign cycle threatens.

Merkel commands the stage, but she is a constrained commander. She has an electorate and a parliament that has been reluctant to agree to more assistance to those whom many Germans see as architects of their own misfortune, not to be trusted to do anything other than load the burden on to the backs of hard-working Northerners.

In other parts of the Union, signs of strain now manifest themselves daily. In France, the leading candidates – President Nicolas Sarkozy and Socialist contender François Hollande – have turned inward and, in the words of a sharply worded Economist editorial, while “it is not unusual for politicians to ignore some ugly truths during elections 
 it is unusual, in recent times in Europe, to ignore them as completely as French politicians are doing.”

Sarkozy has transformed himself from responsible European statesman into an anti-immigrant, anti-free-trade superpatriot (and his ratings improved). Hollande, from the Socialist Party’s moderate wing, has likewise transformed, but into a “hater” of the rich. Both see strong contenders to their right and left: Marine Le Pen of the far-right Front National has faltered recently – perhaps because Sarkozy has stolen some of her clothes – but she still polls at around 14 percent. And on the left, former Socialist minister Jean-Luc MĂ©lenchon has swung hard-left, put together a group that includes the Communist Party, and seen his support rising in the latest poll, for LH2/Yahoo, up to 15 percent so far.

Britain is not in the euro but is deeply dependent on European resurgence. Its Conservative-Liberal coalition government finds itself faced with strikes by tanker drivers – men with a capacity for squeezing a nation’s windpipe – and plunging polls. Nor is anyone else enjoying support. All the main party leaders see their ratings deep into negative territory; and in a by-election last week, the renegade Labour MP George Galloway played for and won a heavily Muslim vote in the city of Bradford, destroying a long-held Labour majority.

Italy’s governing technocrats, led by Mario Monti, enjoyed a honeymoon even as they sketched out a program of cuts, but now enter a tougher time. The government wants to remove or at least dilute Article 18 of the labor code, which makes it hard for employers to fire workers. The unions have threatened strike action, and Monti, earlier this week, agreed to a compromise with political leaders – but no one knows if the unions will accept it. The Italian press agrees: The hard pounding on his government has begun.

Spain’s center-right government passed a budget last week that was described as “the most austere in democratic history,” with £27 billion worth of cuts. The day before it was passed, a general strike flared across the country, with 1 million protesters on the streets. The government itself fears that the depths of the cuts will stall any growth and that the huge unemployment, especially among the young, will become uncontrollable.

And now little Ireland, which had been the good girl of the euro class, taking its medicine without complaint, has turned. A group of parliamentarians called on their fellow citizens not to pay a recently levied flat-rate property tax – and were (presumably) gratified to see that, by the weekend deadline to register for the tax, half of the eligible population had not done so, signaling a taxpayers’ revolt. Thomas Pringle, one of the MPs, was quoted as saying that “if a law is unfair and unjust you have a right to oppose it.” Ireland, which had begun to recover early last year, has seen two quarters of negative growth, slipping the country into recession.

All of this is bad, but worse is the straining away from conventional politics. It takes different forms. The victorious George Galloway, the Bradford victor and a man of apparently indefatigable ability who can muster a ruthless populism, is less important (though not in his own eyes) than the contempt that seems to attend the harassed leaders of the British parties. Parties of the far right and left are significant in France and Greece. In the Netherlands, Geert Wilders’ far-right Party for Freedom has, by contrast suffered a drop in popularity – but that seems to be because he has supported the center-right government, and thus tarnished himself in the eyes of voters impatient for radical action on immigration and crime. Italy’s main parties have been given a holiday from government and even from opposition; but they do not seem to be putting it to use to prepare themselves for hard choices when, as he has promised, Mr. Monti bows out early next year.

Yet only the mainstream parties can command and defuse this crisis. That is not because they have an automatic right to fill the political stage, but because no alternative that can plausibly present itself as better has emerged. The far left and right recycle their nostrums: the end of capitalism or the end of immigration. The Green Party, once a real force in some states, is back to minor status everywhere.

No force, conventional or novel, has yet been able to articulate and win assent for a manifest truth: that Europe’s centrality to world events, wealth and cultural dominance over long centuries are now much reduced, and the decades of growth that brought relative wealth and ease are over. We need not sink, but we have to paddle harder if we wish not to. This crisis is not gone if and when the continent’s finances are made less perilous. If and when that happens, the next mountain to climb is to discover a political and economic structure that can ensure renewed growth, if possible without further gross inequity and without further pollution (some trick!). The challenge of the emerging countries is not just to the cost of labor and the survival of industries: It is to the very understanding we in the West have of our world and our place in it.

The U.S. has sheltered Europe since the war. Europe outsourced most of its defense, and enjoyed – as did the rest of the world – trade, air, shipping and Internet pathways kept open by, in the end, U.S. power. Now, a raft of jeremiads, by Zbigniew Brzezinski, Robert Kagan and Ian Bremmer, all out this year, point to a dangerous, much more anarchic world that would emerge if the global sheriff lacked the strength to take his boots off the desk and ride out. All of these see Europe as of little help, either unable or unwilling – or both – to shoulder a burden that now urgently needs sharing. The salvation of the euro, and of the Union, is of global import. It has yet to be ensured.

More From John Lloyd
Ukraine’s future lies with the West, but there is much suffering ahead
No gimmicks, just 10 good reasons why Scotland shouldn’t leave the UK
In clashes over Ukraine or Iraq, liberty must be defended
Russian ‘realism’ is winning now, but will fail in the end
Germany’s renewed hegemony isn’t something Europe needs to fear
‘Braveheart’ they’re not. What’s Scotland’s problem with a United Kingdom?
Comments
9 comments so far

the malaise in Europe reflects the lack of legitimacy of governing structures; politicians are not rooted deep enough; lack of transparency and “managed democracy” techniques have been used for too long; traditional elements of society have been brushed aside;
there is no need to have so many young unemployed, it is easy to share existing jobs with them, but to do that and address efficiently other major structural problems, you need the family to discuss it around the sunday lunch table and make a firm decision to implement it; but not many such sunday family lunches do happen at the moment;. Time is coming when letting natural social structures resurrect themselves becomes widespread; then cooperation and harmony might make a surprising comeback;

Posted by Paats-W. | Report as abusive

It may be difficult to determine how much of this was brought on by the creation of the Eurozone, but I personally believe that the Euro was a grand experiment that put the cart about half a mile in front of the horse.

Unpleasant though it may seem, preserving the Euro is only going to extend the time to recovery. The Euro’s very existence is preventing the natual forces that should be in effect from getting at the problem. The unpopular reality is that a big chunk of Europe has been getting a free lunch for a long time.

Scrap the Euro now and get on with the solution, or drag it out for ten miserable years, then end up scrapping it when things are far worse.

Posted by variola | Report as abusive

Terrific shame that the one economic system that works – the one born in Britain and which led ALL the classes out of the swamps of misery 300 years ago – has been abandoned for flashy retools of old, failed models of social engineering and cronysim.

Posted by ColeS | Report as abusive

This is the way excessive government and union bloat always ends. Too many unfunded pensions promised to too many early retirees. Too much union inspired protectionism (and stupid employment laws)killing job growth.

Schools and colleges taken over by anti-capitalist (government salaried) Marxist agitators pretending to be professors.

This is where Obama wants to take us.

Let’s hope the voters get a clue.

Posted by Parker1227 | Report as abusive

This is the way excessive government and union bloat always ends. Too many unfunded pensions promised to too many early retirees. Too much union inspired protectionism (and stupid employment laws)killing job growth.

Schools and colleges taken over by anti-capitalist (government salaried) Marxist agitators pretending to be professors.

This is where Obama wants to take us.

Let’s hope the voters get a clue.

Posted by Parker1227 | Report as abusive

The US politicians would do well to pay attention to French politics, but they won’t because they have lost touch with reality. The French people, as usual, are far ahead of everyone else.

And they are willing to back up their demands with action, if their message doesn’t get through. That’s why French politicians pay attention to the French people.

Likewise, the American people would also do well to pay attention to French politics for the same reasons.

————————————————————————————-

Sarkozy has transformed himself from responsible European statesman into an anti-immigrant, anti-free-trade superpatriot (and his ratings improved). Hollande, from the Socialist Party’s moderate wing, has likewise transformed, but into a “hater” of the rich. Both see strong contenders to their right and left: Marine Le Pen of the far-right Front National has faltered recently – perhaps because Sarkozy has stolen some of her clothes – but she still polls at around 14 percent. And on the left, former Socialist minister Jean-Luc MĂ©lenchon has swung hard-left, put together a group that includes the Communist Party, and seen his support rising in the latest poll, for LH2/Yahoo, up to 15 percent so far.

Posted by PseudoTurtle | Report as abusive

“… discover a political and economic structure that can ensure renewed growth…”

i think that we had a semblance of that, and it was deregulated away in a covert economic neo-imperialism in the name of “globalization” executed by priests of the finance class that had overtly infiltrated government.

they managed to effect a redistribution of wealth upward on an unprecedented scale, after the house of cards of “wealth creation” that they sold to your neighborhood mutual fund holding pension funds.

corporations are hoarding cash, because they want to perpetuate a false hierarchy that the executives and shareholders think their wealth should afford them.

governments are in debt, however, and are subject to media pressure to prevent them from funding a recovery that would force the corporations to compete in an open market in a
“political and economic structure that can ensure renewed growth” that was returned to normalcy in terms of regulation and risk to the investor class (and maybe stiffer penalties for white-collar crime).

how can governments force corporations–which still appear to be exercising undue leverage over governments–to invest or face the prospect that their hoard of cash will become diminished in value?

there must be some tax-related policy initiatives that could encourage such corporate behavior.

it is clear that austerity is unfairly and intolerably targeting the members of the working class that are being driven to destitution.

Posted by ubikwit | Report as abusive

I think the biggest problem is that we are still picking details and discuss them instead of looking at the big picture, taking on the real problems.
1. Trying to pull of a financial, economical Union without structural, fundamental Union was always going to end in disaster. As soon as the years of prosperity came to a halt, the false foundations have been exposed and now simply “repainting the walls”, or the cosmetic financial adjustments will not reverse the rotting. Only a full socio-economic integration could make any Union work.
2. The even bigger problem is that the core engine of the whole global economy is also false and it is also broken. We are not in a crisis, or recession, we entered system failure. The present constant growth, expansive, exploitative (based on tricking, brainwashing consumers to keep on buying products they do not need and are harmful, for money they do not have) economic model has become self destructive after reaching and leaving tipping point in 2008, as it is totally unnatural and unsustainable. And this is true to each and every country including the US, the emerging market countries, Africa, Australia and so on.
The politicians are simply playing their games for positions, personal legacies, but they do not even preteen any more that they have meaningful solutions, just look at G20 meetings, European crisis meetings and the election campaigns all over the world.
What we can learn from the European example is that a Union is necessary for prosperity, or any hope for sustainable future in today’s global, integral world, but for the Union to work we need full integration, from ground up, in a supra-national, mutual, democratic and equal way.

Posted by ZGHerm | Report as abusive

“[no one] has yet been able to articulate and win assent for a manifest truth: that Europe’s centrality to world events, wealth and cultural dominance over long centuries are now much reduced,”

This is because no one ever saw Europe that way. There were various European empires. Then the countries of Europe, in accepting that their individual centrality to evenats was much diminished, banded together to retain as a unit some centrality to events.

Europe today is more important to world events than Belgium was in the 19th century.

The real problem is a disconnect in European ambition between the peoples and elites.

On top of that Europe needs to decide if it will really have its own foreign policy. There is a choice to be made between prolonong tyhe life of NATO and proper European engagement in world events. You can’t have both.

Posted by Dafydd | Report as abusive
Post Your Comment

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/