Category Archives: Europe

What can we learn from Greece’s crisis?

Summary: Now the final act has probably begun in the long divorce of Greece from the European Monetary Union. Ignore the predictions. They’re just wild guesses. Rather let’s take this moment to contemplate how Greece — and Europe — got here.  {1st of 2 posts today.}

“Europe will be forged in crises, and will be the sum of the solutions adopted for those crises.”
— Jean Monnet in his Memoirs (1978). He was one of the architects of the program to unite Europe (see his Wikipedia bio).

EU flag burning on the ground

Unnecessary death of a dream.

After years of confident assurances that all would probably work out for the best, Greece has gone off a cliff. This was long expected by readers of the FM website. In July 2007 they read that the European Monetary Union probably couldn’t survive the next recession in its current form. The cracks opened in 2010; in February 2012 I predicted it would not survive the crisis.

Europe’s lending and monetary stimulus programs to the PIIGS (Portugal, Ireland, Italy, Greece, and Spain) delayed the crack-up until 2010 and extended the slow decline since then, Now the crisis has begun. It will almost certainly bring big changes to Greece. As for the rest of Europe, and to the unification program, who can say? Greece is small, but it might create large precedents for others to follow.

While journalists report the exciting events to come — entertainment for America’s outer party (managers and professionals), because what difference does it make? — we can ponder how this happened and what America can learn from this.

We’ll see many economists explain why this resulted from incompetent politicians. This crisis would have been manageable if tenured economists at majored universities ran the world! Barry Eichengreen (Berkeley) says “Path to Grexit tragedy paved by political incompetence.” I suspect that a tag-team of Solon, Pitt the Younger, and Washington would have found this crisis difficult to handle.

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A high stakes cage match: Nationalism vs. the European Union

Summary:  The European Union appears to be starting its long-predicted endgame, when its  design flaws create insolvable crises. This analysis by Stratfor goes to the heart of the EU, describing the forces that seem likely to halt or reverse the 65 year-long march to unification. They make a bold prediction which, if correct, will change the course of 21st C geopolitics. {2nd of 2 posts today.}

Stratfor

How Nationalism Undermines the European Union

Stratfor, 29 May 2015

Forecast

  • The loss of economic prosperity has hurt European integration efforts. Member states will now push to devolve power from the European Union to the national level.
  • Nationalist and anti-establishment parties in member states will undermine fundamental EU policy.
  • EU institutions will be able to manage this trend in the short term, but the economy will force Brussels to reshape the European Union.
  • Over time, nationalism will trump European integration and governments will repatriate power for the first time in EU history, leading to the collapse of the union.

On May 29, 2005, French voters rejected a proposed European Constitution in a nationwide referendum. A week later, the Dutch followed suit. This clear rejection of greater European integration was an iconic moment in the history of the European Union. Although it came in the form of a nation-state constitution, the European Constitution would primarily have collated all previous EU treaties into a single document. This symbolic act, plus the granting of more legislative powers to Brussels, would have been a major step toward a unified Europe formulated in the wake of World War II.

A decade since the Dutch and French referendums, the European project is in its deepest crisis. The economic turmoil that began in 2009 and produced the eurozone crisis has awakened nationalist instincts that undermine pan-Europeanism. These centrifugal forces have always been present and, historically, led some members to opt out of certain initiatives. The key difference in 2015, however, is that nations will choose to backpedal on integration — a first in EU history.

Integration and Sovereignty

The contest between nationalism and pan-Europeanism has been at the core of the European Union since it was first formulated in Rome in 1957. The union is an attempt to create a transnational entity out of a group of nation-states defined by different economies and political traditions, divided by a history of conflict. To unify these states, the European Union promised peace and economic prosperity. The resulting organization was a hybrid between a unified pan-European entity and a community of sovereign nation-states. In the ensuing decades, these competing visions have continued to clash, with nationalism succeeding several times in slowing the integration process.

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See our victory in WWII by what didn’t happen afterwards

Summary: On Memorial Day we remember the sacrifices by those who fought in America’s wars. But let us also remember the victories they won. None greater than in WWII. Here the eminent historian Martin van Creveld reminds us of what people expected for the post-war world. We did much better than that, showing what we are capable of doing in the future.

When after many battles past,
Both tir’d with blows, make peace at last,
What is it, after all, the people get?
Why! taxes, widows, wooden legs, and debt.

— Francis Moore in the Almanac’s Monthly Observations for 1829. We did much better.

From Clement Attlee's 1945 general election campaign against Churchill.

Clement Attlee’s 1945 campaign against Churchill.

 

The Things that did Not Happen

By Martin van Creveld
From his website.
7 May 2014
Posted here with his generous permission.

 

Seventy years ago, World War II in Europe came to an end. No sooner had it done so — in fact, for a couple of years before it had done so — people everywhere had been wondering what the post war world would look like. Here it pleases me to outline a few of their expectations that did not become reality.

Communism sweeps through Europe

In 1945, much of Europe — and not just Europe — was devastated. Tens of millions had been killed or crippled. Millions more had been uprooted from hearth and home. Scurrying about the continent, they were desperately seeking to rebuild their lives either in their original countries or elsewhere. Entire cities had been turned into moonscapes. This was true not only in Germany (and Japan), where British and American bombers had left hardly a stone standing on top of another, but in Britain (Bristol, Coventry), France (Caen, Brest), Belgium (the Port of Antwerp), the Netherlands (Rotterdam and Eindhoven), Hungary (Budapest), and Yugoslavia (Belgrade). Transportation and industry were in chaos.

With unemployment, cold — the nineteen forties witnessed some of the harshest winters of the century — and even hunger rife, many expected large parts of the continent to go Communist.

In fact, it was only Eastern Europe that became Communist. And then not because its inhabitants, war-ravaged as they were, liked Communism, but because Stalin and the Red Army forced it on them. Many west-European countries, especially France and Italy, also witnessed the rise of powerful left-wing parties. So did Greece, which went through a civil war as vicious as any. None, however, succumbed to the red pest. By 1950 production was back to pre-1939 levels. By the late 1950s, though eastern countries continued to lag behind western ones as they had begun to do as early as 1600, most of the continent was more prosperous than it had ever been.

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Today all roads in Europe lead to Greece, where its future lies in the balance.

Summary:  So many of the threads of history today run through Greece and the Middle East (not for the first time). The range of possible outcomes is wide, from wonderful to horrific. Yet we know too little to make accurate predictions (I suggest making free time by ignoring the confident guesses that overflow the news channels). Here we examine the key facts.

EU flag burning on the ground

Unnecessary death of a dream.

The Greek-Troika negotiations might have large effects on the future of Europe. Here’s my analysis (it’s similar to Tyler Cowen’s , but with more detail).

(1) The news tells us little.

Cowen nails this: “The further apart the various parties appear to be, the more the whip of concession gets cracking. The closer to an agreement they may seem, the greater the incentive to play hardball and demand further concessions.” Also, press releases seek to influence public opinion, not inform us.

(2)  Do both sides have a negotiating strategy? Does either side?

Cowen: “quite often leaders in critical positions simply do not know what they are doing. By no means is that always the case, but it is more often the case than narrative-imposing journalism encourages us to perceive.”

Both sides certainly have a clear understanding of what they want. Do they have a clear negotiating strategy? Or do they just stumble along, responding to events? History overflows with examples of the latter, with July 1914 at the top of the list.

Both sides quite sensibly keep their cards hidden, so we can only guess. Some of their public statements seem disturbing. Like the following from Helena Smith’s interview with Greece’s finance minister, Yanis Varoufakis (The Guardian, 13 Feb). Is he sincere or posturing as a tactic?

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The Truth and Beauty of Madrid and Lombardia (Down and Out)

Summary: The fate of Europe depends on many factors, not least on the support of the people in Europe’s periphery for the European Union. Today we have an excerpt from Truth & Beauty that gives an accurate picture of conditions in this pivotal region, with a comparison to Russia’s time of troubles.

“Labor reform means slavery”. AP photo by Emilio Morenatti

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This is a follow-up to Social unrest coming to Europe? If not, why not?, 21 March 20013.

Contents

  1. A missing element in our world
  2. Down and Out In Madrid &  Lombardia
  3. About Truth & Beauty
  4. About the author
  5. For More Information about Russia

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(1)  A missing element in our world

As the long economic crisis continues — with stability maintained in the developed nations only through unsustainable levels of fiscal and monetary stimulus — one barrier to change becomes ever more obvious: the lack of alternative ideas for organizing the political and economic machinery of society.  That is, finding new modes of social organization that are attractive to some combination of the our elites and the mass public.

Without new alternatives we might remain locked in a crisis with no exit. Our only hope lies with the eventual success of conventional economic policies — and the political apparatus that implements them. Or the ability of our societies to recover (ie, heal themselves), eventually.

To illustrate the abyss into which this has plunged the worst affected nations, today we have an excerpt from “A Hard Rain (’s a Gonna Fall)“, the April 5 issue of Truth & Beauty, by Eric Kraus and Alexander Teddy. They shine the clear light of common sense on the world, cutting through the fog of misinformation emitted by the western news media. This is reprinted with their generous permission.

(2)  Excerpt from T&BL “Down and Out – In Madrid and Lombardia”

T&B has been on the road in Southern Europe. We find nothing remotely encouraging to say – this year, not even the weather was significantly better than Moscow – and the employment situation far, far worse. If the situation were not so grim, there would be something funny about the governments of a continent in deep recession (or depression, in its South/ Western corner) lecturing Russia – with its slow–but positive growth and 5% unemployment – about the virtues of a liberal economic policy.

Perhaps surprisingly, nowhere in Europe is the popular mood one of rebellion or of any longing for a violent overthrow of the existing order – there is no Marxist revolution anywhere on the horizon; rather, one senses a quiet despair, escapism and cynical pessimism. Unemployment is endemic and systematic, in Spain and Portugal the unemployed do not even hope to find a job. People find ways to cope – the welfare state, the informal economy and family structures provide some support – but in terms of building a career, family and future, the prospects are grim.

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Social unrest coming to Europe? If not, why not?

Summary: Five years of crisis in Europe, yet its streets remain mostly calm. What accounts for this? How long will it continue?

“At the heart of the crisis, there is the challenge of redefining the social contract to safeguard the sustainability of Europe’s social model.”
Speech by Benoit Coeure (Executive Board of the ECB), 2 March 2013

“Spot on, Benoit. The trouble is European leaders and institutions seem to want to redefine the contract in ways that at least half of European citizens don’t approve, or trust them to carry out. So underneath the three-headed crisis of austerity, banking and sovereign debt, we have one of legitimacy and trust, which is feeding social unrest.”
— George Magnus, Economic Advisor, UBS, 20 March 2013

Liberty Leading the People, Eugène Delacroix (1830)

The painting “Liberty Leading the Way” commemorates the July Revolution of 1830, midpoint to a century of social unrest in France. It shows the result of mismanaging the forces of change.

Contents

  1. Why is Europe still stable?
  2. What comes next?
  3. Compare with China
  4. Leave a comment
  5. For More Information

(1)  Why is Europe still stable?

The stability in Europe since the second downturn began in March 2010 has surprised many observers (eg, me). Three years of depressionary conditions in the periphery have produced no large, severe outbreaks of social unrest. Elections have produced majorities in favor of the European Union and the austerity it mandates (we’ll soon see if February’s election in Italy broke this record).

What produces this stability? The usual supports for incumbent systems are human inertia and people’s dislike of radical change.  Hence the failure of the frequently made forecasts of regime change in developed nations. But those explanations seem in adequate, as does embrace of the EU from fear of war.

History provides a possible answer: the lack of an alternative. Thomas Kuhn in his The Structure of Scientific Revolutions (1962) says that scientific paradigms die not when they are disproven, but when they are replaced by a superior alternative. In much the same way revolutions (peaceful or otherwise) require a new political or economic ideology that can substitute for the old.

Without an alternative, accumulated stress breaks out in futile forms, such as protests and riots. These are a commonplace of history, such as the peasants’ protests (Wikipedia) and race riots (Wikipedia). These can produce incremental reforms (although they usually didn’t), but participants seldom had a vision of a realistic better system. Although recognized as defective, other systems were considered less attractive or unworkable (eg, plutocracy in Holland, city-states in Switzerland). For centuries this provided a buttress for European monarchies.

(2)  What comes next in Europe?

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Justice still lives. It’s found a new home – in Europe.

Summary:  The European Court of Human Rights shows America that the love of justice still lives there, finding Macedonia guilty of the crime of cooperating with CIA crimes.  Slowly what was a city on a hill (Matthew 5:14) sinks into the mud.  Slowly our global leadership erodes, leaving just another military power (funded by loans from Japan and China).

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A Lady Justice for the 21st C. By Zhack-Isfaction at DeviantArt.

Content

  1. Summary of the case
  2. The Court’s ruling
  3. America responds: secrets trump justice
  4. More about this episode of our history
  5. For More Information about justice in America

This is another in a series of posts about the death of justice in America.  Links to the others appear at the end.

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(1)  Summary of the case

From “Torturing the Wrong Man“, Amy Davidson,
The New Yorker, 13 December 2012

A judgment issued on Thursday by the European Court of Human Rights contains an account of the treatment of a man who, after some detective work by a foreign police force, was handed over to the CIA as suspected member of Al Qaeda …

Why would someone with such dangerous connections be released? What about the information he might have that could unravel some devious plot?

The answer is simple: after a couple of months, the C.I.A. figured out that they had picked up not a shadowy terrorist but a car salesman from Bavaria who happened to have a similar name. Even then, they kept him prisoner for several weeks while trying to figure out their next move. There is now no dispute that this was a case of simple mistaken identity.

(2)  The ruling

Excerpt from a Decision by the European Court of Human Rights, 13 December 2012:

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