Tag Archives: EU

A euro for your thoughts


by Sol Sanders

The European Union has entered a multifaceted and what promises to be an extended crisis.

It will reshape European politics and its outcome will have far-reaching effects on the world economy and international politics. Resolution of the crisis will come with even more difficulty since the Europeans for the first time since the end of World War II cannot count on a strong role of Washington as mediator and mentor.

First off, it is important to remember that despite all the propaganda to the contrary about newly arriving power centers – and the weaknesses exposed by its current troubles – Europe remains the force in world affairs unmatched except by the U.S. Its more than half a billion population with almost a quarter of the world’s total economic activity, enormous cultural diversity and heritage, with infinitely fecund research and technological innovation, and with a diminished but technologically powerful military, still dominates the world scene.

When we speak of “Europe”, of course, we are lumping in a set of complicated relationships as well as groupings. The geographic Europe is everything west of the Urals in mid-Russia, but for the moment Russia has excluded itself from the European family. That’s in part because the European Union now includes all the countries of Western Europe except Norway and Switzerland, and more recently central, northern and parts of eastern Europe for a total of 28 countries [with four more former Yugoslav states soon to join].

The EU institutions include the European Commission, the Brussels-based appointed executive, the Council of the European Union, its upper house of parliament composed of executives of member states, the directly elected European Parliament, the lower legislative house, the Court of Justice, the European Central Bank and the Court of Auditors. At least theoretically, these countries now have a common market and are moving toward a standardized legal system. A separate treaty removes passport controls among all the countries [including Norway] with the exception of the U.K.

Eighteen of these countries – with the exclusion of the U.K., Denmark, Sweden and Poland – are part of the Erozone, using the Euro as their currency. [Seven additional states are obliged under their treaty obligations to join the common currency at a later date.] Since the international crisis of 2007-08, the European Central Bank has become a mini-International Monetary Fund. It has taken on a role of handing out emergency Euro loans to some of its members in deep trouble and is helping to work out individual national economic reform agendas. Through it purchase of national government bonds – Germany has blocked Eurobonds – it also indirectly helps direct the finances of the individual members.

Rather suddenly, a series of problems have grown acute, testing to their limits these and older European institutions in a way not seen since the onset of The Great Depression and the resultant collapse of much of Europe into authoritarianism. These developments put into question whether national interests can be subsumed in a superstate which has become the aim of many of the proponents of further European economic and political integration. Or whether, as an alternative, national and regional sentiments within some older nation-states will scotch this movement, or, indeed, reverse the whole effort.

The problems are, of course, interrelated and will require new efforts at international collaboration as well as mobilization of resources to move on to another stage whatever that may be. It’s no wonder then that any attempt to describe the ideological and more practical conflicts of the various constituents looks like a cat’s cradle of connections which alas! are not likely to fall apart as quickly as success at that old string game.

Putin’s challenge After more than a half century with sometimes bitter but relatively minor wars, Europe is faced with the continuing threat of naked aggression by a major power, Russia. An unstable Moscow regime glories in its inability to assimilate politically to the European consensus. But unlike its autarchic Soviet predecessor for which many of its leaders [and unhappily its citizens] have deep nostalgia, Putin’s Russia is not only directly intertwined with the world economy but virtually totally dependent on its sale of fossil fuels to the rest of Europe. [Recent feints to the East to China are just that with so-called trumpeted agreements falling far short of their ballyhoo.]

Using methods that could have been copied from the aggressive pre-World War II Fascist and Communist dictatorships, Moscow bluffs at least temporarily have overwhelmed European [and American] leadership. Neither Brussels, the national capitals, nor Washington have found an adequate response thereby inviting further aggression from Putin’s ad hoc agenda to restore what he claims is Moscow’s hegemony in Eastern and Central Europe if not a superpower. The fact that Ukraine has become the focal point for the conflict is symptomatic, for it is the irresistible attraction of participation in the European movement toward integration which draws Kviv away from its traditional domination by Moscow.

Democracy quotient The EU’s original deadly fault – top-down imposition of a new regulatory regime on self-governing societies – has finally climaxed in the candidacy of a new president of the Brussels bureaucracy. Tiny Luxembourg’s former prime minister, the lackluster politician Jean-Claude Juncker, has by happenstance become the nominee of the European parliament for the presidency of the EU on the claim that his party now has a majority in that assembly. That claim, reinforced by the lack of other major alternate contenders, in effect would establish parliamentary supremacy against what has been a tradition of hand-picked appointed Brussels bureaucracts..

But Juncker’s advocacy of more “federalism” – further political as well as economic integration – challenges London’s opposition to a stronger federal union at the same time its most ardent advocate is Germany. Furthermore, a clutch of anti-EU parties – some of them proto-fascist – now hold a fourth of the seats in the European parliament.

Britexit The sweep of anti-EU skeptics of the British delegation in a just completed Europe-wide election for the European parliament threatens to increase the growing minority in the U.K. who want to leave the EU. Conservative Prime Minister James Cameron, increasingly threatened by an anti-EU, anti-immigration, nationalist swell on the right, has promised a 2017 referendum on leaving EU membership. At the moment, British public opinion remains divided with apparently a small majority for remaining in the EU, but continuing as a limited partner. However beleaguered is its sterling currenmcy, most Brits count themselves lucky they stayed out of the Euro and thereby reinforcing the role of The City as perhaps the foremost international financial center.

Germany, a proponent of further integration, nevertheless makes preventing the departure of the British, its main ally in opposition to French and other EU partners’ statism, its highest if contradictory priority. Britain’s exit would, of course, have enormous repercussions inside the EU beyond its role as the main opponent of further bureaucratization, feeding skepticism which exists in Scandinavia, for example, and may even be growing in Germany where it has been a dogma of the post-World War II regime.

Economic malaise The European Central Bank president, Mario Draghi’s imposition of a negative interest rate – that is, the national central banks’ deposits into the Euro would be charged interest – is a groundbreaking effort to stimulate growth Theoretically, it would force the central banks to loose their lending policies. It is an attempt to counter the austerity policies throughout most of bankrupt southern Europe’s economies and the resultant high unemployment of low growth rates and increasing political instability.

Draghi’s policies are bitterly opposed by Germany with its paranoia about inflation from the deadly post-World War I expeience. Meanwhile, as by far the largest EU economy it continues to maintain a budget surplus through its “beggar your neighbor” trade policies. [Germany rolled up the highest trade surplus in the world at $270 billion in 2013 despite the fact that 60% of its exports went to other EU partners. [If Germans sanctimoniously blame their souther partners’ priofligacy for their situation, it was German-financed exports that in large part brought on the disaster.]

Germany’ situation is almost unique in the region. Its per capita income is 23% above the EU average with more than a fifth of the federation’s gross development product. That it is inimitable to Draghi’s grand strategy sets up an enormous conflict inside the EU at a moment of economic crisis.

Nor is it at all clear that Draghi’s effort will help given that the bulk of the Euro’s transactions still remain in national budgets, most of them already in deficit. That, of course, is the long term argument for further integration, welding differing financial strategies into a whole behind the Euro. But Berlin’s notorious historical incapacity to lead a democratic alliance contradicts Germany’s hegemonic economic role inside the EU, another reason why its effort to keep Britain inside the union is consered by many,m even in Germany, so critical.

This welter of crosscurrents takes place at a time of a growing perception – probably realistic — among European leaders that the U.S. is retreating from world politics and when the world engine of growth, the American economy, is sputtering.

Any of these various issues and contradictions could at any moment flare up into the kind of crisis that would feed popular sentiment and the 24-hour media, overshadowing the general confusion of these more complex economic and political issues. That question of unexpected events now dominates the European and ultimately, the world scene.

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We already went through that


News item, August 23, 20111

Spain will reform its constitution to limit the budget deficit and the level of public debt under a law proposed by José Luis Rodríguez Zapatero, the Socialist prime minister, and supported by the rightwing opposition.

Nobody seems to remember that we had a stipulation in the original Maastricht Treaty [Feb. 2, 1992] limiting national budget deficits and France and Germany were the first ones to ask for the remission of the proviso — temporarily, that is. 

Oh those naughty North European spendthrifts!

Paralyzed? no, numbed a bit!


from a dear friend:

It is not the US President, Senate of Congress, but the full application of “check and balance”:
in the past “balance” was not applied to the full because Republicans and Congress shared the same basic values; now Congress as well as Senate are fundamentally divided, and Congress, Senate, Legislative and Executive all blocking each other. The US Government is paralysed, no matter who is President, and how good the President is…

I don’t see it this way at all.
First of all, the financial crisis [the 20107-08] was initially brought on by government interference resulting from the housing debacle which was the product, not of the markets, but of government legislation and regulation intended to manage the housing scene for supposed beneficial and narrower partisan ends.
The nature of the crisis was also exaggerated in the heat of the debate: there was no threat of immediate default given the government’s revenues, etc. Obama & Co. were trying to use  concern with default to force their philosophy of government intervention in the economy on the majority which still opposes it, at least in theory although the electorate has to some extent been “bought off” with populist arguments and “spoils”. It is a basic argument over whether more of the resources of the economy are to be used to fund government and its intervention in the markets and the society or to permit the markets with all their imperfections to dictate the direction and progress of the economy and the society generally by  maintaining maximum personal freedoms and choices.
The debate was useful and necessary as nasty as it looked. Great ideological battles are always ugly in a democratic society with representative government. After all, what is the use of having a debt ceiling if it is a matter of “routine” as the Administration argued, to keep voting it larger and larger, without this fundamental examination.
The partial resolution of the crisis has, for the moment, been effective. While it was a compromise of the goals of one party — the fiscal conservatives — it did accomplish its purpose by making increasing debt and additional taxation the main subject of the debate, which it had not been and which the opposition — the Obama Administration and its supporters — had refused to accept until now.
I think a watershed in thinking has been achieved and will have its long-term effect.
All this fashionable commentary — such as this BBC piece, which I see as typical of the “bien pesant”, and I must say, more trypical than not, of the BBC and The Economist — about the paralysis of government, etc., etc., is superficial and ahistorical. The U.S. has always gone through these kinds of crises when big issues are being debated. They are inevtiable, a part of the life of a relatively effective system of representative government but one based on a division of powers. [Please note that the European style of the monopoly of a legislative body — where it hasn’t broken down — rather than an intended balance of forces among legislative, executive and judicial certainly doesn’t work better. The evidence, if further historical references were not enough, is the crisis of the Euro and the EU which is as deep if not deeper than the present situation in the U.S. with less possibility of resolution, I would argue.]

A vicious circle tightens



The globalized economy’s undertow is ripping all around the world.

Even the economic optimists’ two darlings, China and India, are now troubled. Seen as the world’s growth machine [along with a now overheated Brazil] in a period of advanced economies’ stagnation, their downturn produces a universally grim world outlook.

India, now the world’s largest population, had promise to overtake

China – perhaps more stable with its veteran private sector and representative government. But inflation threatens with food almost half its consumer index rising to more than 9 percent last month. Prime Minister Manmoham Singh, after all a graduate of Soviet-style Indian planning, has his foot on the brake and gas pedal at the same time. Reserve Bank of India rates force lending for preferred firms to 13 percent and notorious paper-shuffling babus [clerks] hobble initiative, sending Indian coal companies, for example, despite some of the world’s largest reserves, chasing projects from Australia to North America. A spate of influence peddling scandals, including $16-billion in telecommunications, further clouds the scene.

New Delhi’s geopolitical rival, China, has turned its back on its 25-year strategy to prevent destabilization of one-party dictatorship with maximum growth. With incipient inflation, Communist leadership enters a generational succession next year trimming its investment-led behemoth’s sails. Widespread civil violence – despite enormous expenditures for the most elaborate hi-tech suppression machine in the history of authoritarianism – jeopardizes any new tactics. In fact, all the Chinese boom’s contradictory chickens simultaneously are coming home to roost: vast overexpansion of infrastructure feeding the boom [along with subsidized exports] has produced marvels for photographers but a real estate bubble including, literally, empty new cities. There’s growing resentment over second class citizenship and lack of services among more than 200 million migrant labor from rural areas stampeded to coastal cities employment. Declining foreign markets, roaring imported commodity prices [ironically brought on in part by speculation on “unlimited” Chinese demand], wage pressure, competition from export-led cheap-wage producers, monumental corruption, all now threaten “the Chinese model”. Consumption continues to decline as a percentage of domestic product mocking talk of redirecting a growth strategy. A combination of nonconvertibility and hot money chasing an undervalued yuan demonstrates how empty talk of it as an international reserve currency is. Beijing’s capacity for foot in mouth disease is epitomized in its increasing hoard of dollars and Treasury debt [again on the upswing] while officials continuously publicly denigrate the dollar.

So much for “the emerging markets”.

Turning to the developed world, there, too, crises are escalating.

A bureaucratic hassle over the Euro with divergent views in Berlin, Paris, Brussels and Frankfurt is turning into a dragged out effort to save the 17 European Union members’ common currency. Meanwhile other integration efforts — a free labor market and common defense and foreign policy — are faltering. A Greek default could produce a European banking crisis [even contagion for North America]. In other words, a fiscal and monetary crisis is turning into a major political upheaval threatening accepted European patterns. Half-baked intervention in Libya, dragging in NATO and the U.S., was announced in idealistic terms by Europe’s leaders. But it encapsulates European concerns – unlike the increasingly hot American debate over Obama Administration’s opting for “a war of choice”. For Europe “Libya” is linked directly to falling birthrates and need for imported labor and unemployed North African, Middle Eastern and Black African youth almost literally swimming the Mediterranean at a time Muslim immigrant assimilation is increasingly questioned.

Europe faces, too, the fact the world’s window to the U.S. consumer maw which supplied the post-World War II economy not only with unlimited markets but revolutionary technology has a “closed for repairs” sign with no reopening time indicated. Whatever happens after decades of drunken sailor’s spending, there will be no substantial U.S. economic strategy in place until after November 2012. Current Washington debate, if it can be dignified with that title, over raising the debt limit and reducing government spending, is simply a foretaste of the pain necessary to get the U.S. economy – perhaps now sliding into a double-dip recession — back to its historic miraculous production of jobs and expanding markets.

It’s going to be a long hot summer and a grim fall — despite the American sideshow of political shenanigans with the curtain only temporarily coming down on the first [Weiner] scene.

Crises – but which is the one?


Clichés come in at least two varieties: those sayings artfully worded, however empty of logic. Others trotted out because they do represent universal truths, vetted over centuries. One of the latter: “history does not travel in a straight line”. Afterward, reinforced with additional retrieved facts and by fads, we concoct a simple, “logical” timeline.

For those of us who lived through long decades of The Cold War, we look back to mistaken views of a world scene played out on many stages. Then as now, drama tended to overshadow more important currents.

Relevant, perhaps, was the 1956 Hungarian Revolution. A Soviet satellite state, incidentally Bloc leader under benighted central planning, attempted escape from Moscow’s grip. It, too, began with youngsters in a square. In part, alas! they were emboldened then too by Washington’s support for “liberation”. But when the brave stood against Communist tanks, the U.S. blinked, fearing nuclear war.

Almost simultaneously, Egypt’s military dictator Abdul Gamal Nasser used the pretext of the Eisenhower Administration’s refusal to build the Aswan Dam megaproject  to “nationalize” the Suez Canal, for a century an immensely profitable Anglo-French commercial entity. To regain control, London and Paris used another pretext, warding off but actually colluding in an Israeli Sinai occupation to insure its own passage through the essential waterway.

U.S. Sec. of State John Foster Dulles adamantly forced America’s allies to relent. NATO Sec.-Gen. Belgian statesman Jean-Paul Spaak, an unsung hero of the epoch, literally in tears, beseeched Dulles: we have sinned but grab this opportunity to secure Europe’s lifeline to Mideast oil. Dulles, forever the moralist, refused “to reward aggression”. Nasser got the Canal, reinforced pan-Arabism sweeping the region, allied with Moscow to bedevil the West until his death. But his legacy was a mess of pottage, dismally failing to produce that long-awaited Arab renaissance, leaving a further discredited secularism for the benefit of his Moslem Brotherhood enemies.

Contradicting another cliché, history does not repeat itself, no more than the same water runs under the same bridge as the stream flows on. Nevertheless, while our attention is focused on increasingly bloody events in Araby, perhaps again more important happenings may germinate the kernel of world history elsewhere:

·        The German parliament has just laid down the law to a more than willing Chancellor Angela Merkel: it will not accept a “Europeanization” of the Euro’s financial debacle. With Greece near civil war trying to impose austerity, its southern tier debtor neighbors – facing rapidly increasing borrowing costs – move inexorably toward new “bail-outs”. No all-Europe institutions or mechanisms can meet those costs. Now the Bundestag has closed the door at least temporarily on Eurobonds [with Germany as prime guarantor] which might repeat might have been an “out”. The Euro as we knew it is doomed. Can “the European project” – the effort to create a stable continent shorn of its age-old capacity for intra-European violence — survive it?

·        A huge, new wave of Muslim refugees from Tunisia, Egypt, now Libya [accompanied by “transiting” Black Africans] is flooding Italy and Europe. They come as Chancellor Merkel, French Pres. Nicolas Sarkozy, and even U.K. Prime Minister David William Donald Cameron [the youngest British leader in 200 years], publicly declare “multiculturalism” dead. Failed Western assimilation of new workers in otherwise declining populations has led to indigestible, economically deprived enclaves abetting bankruptcy for “welfare states” created in the postwar prosperity.

·        The Europeans, as the U.S., finds itself in the grip of a growing threat to physical security from totalitarian Islam but bemused by intellectual confusion reminiscent of the1930s seduction of intellectuals by the Leninist road to utopia. When the Catholic Church’s scholarly leader, Joseph Aloisius Ratzinger, attempted to renew the dialogue between Christianity [and Judaism] with Islam – a 1500-year-old debate – at Regensburg in Sept. 2006, he was howled down by the politically correct. Yet native Europeans, their government – and their economies –are assaulted daily by immigrants who want to continue non-European lifestyles including some of the world’s most barbarous customs, exploiting modern Europe’s tolerance and freedom.

·        China, which within a generation has turned itself into “the world factory”, is being drawn into shaky collaborative international financial arrangements but at only a snailspace. Beijing uses its export of “capital” – slave labor and increasingly stolen technology – to blackmail its trading partners. It expands exponentially a military machine against fictitious enemies. Using largely American and EU debt, Beijing is spurring threatening worldwide inflation, uneconomically pursuing raw materials– and increasing worldwide food shortages which it has helped to create by neglect of its agriculture. Its unlimited infrastructure expansion and claptrap financial structure including unprecedented payments surpluses – now pressured by Washington’s “quantitative easing” in its effort to reflate the world’s engine, the American economy – promises a bubble bursting at any moment.

Therefore, as dramatic and seemingly all encompassing as current Arab world happenings would appear, when this period is looked back upon, it could be other contemporary world crises were more important. We, of course, will never know – which, should, inspire a little humility [admittedly not seen in this unavoidably brief review].

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