Europe’s panic button
Whether by bloody-minded obstinacy or a clear incapacity to understand the mess it has overseen, the EU now reaches another of those critical junctures where simply papering over the cracks and maintaining a demented agitprop that growth is around the corner won’t do. Besides, the green shoots of recovery have once again evaporated for the umpteenth time. As the world grows, Europe stagnates.
The EU isn’t working - as 12 percent of the continent’s population know only too well (including that lost generation under 30 born near the Mediterranean). Meanwhile, former Communist-turned-totalitarian-Europhile Jose Manuel Barroso has been enjoying a typically bombastic pre-retirement tour demonstrating a majestic lack of understanding for the stagnancy which has resulted from his decade-long failure as EU president.
Having spent much of the past year blithely mouthing a mantra of recovery, the outgoing commission departs the Berlaymont as even greater political failures than they were in national office before being elevated to Brussels. The demented hubris which preached recovery without coherent reworking of broken economies has been rendered mute by economic reality. Even in Brussels there may be a realization that political fudges won’t do - the European empire must be restructured if it is not to face oblivion. As it is, the pathetic political posturing of national interests led by France (bankrupt) and Germany (deeply disingenuously protectionist) at all times have inexorably weakened Europe in a decade of prolonged growth in the emerging markets of the east.
Thus we reach an abyss for Europe. Germany (as predicted) is a post-peak economic powerhouse. Ukraine has led the EU to self-defeating sanctions which have further trimmed the economy just as growth has proven a mirage.
The fine art of attending endless lavish intergovernmental dinners became a curious ritual in recent years. Some nations, such as Ireland, were sacrificed to save banks in Germany and France. As a financial professional (but not a banker), it has been singularly disgusting post-Lehmann collapse to watch an ongoing act of communist folly - socializing debt to protect banker hubris. For this reason alone, the EU abandoned fiscal credibility.
Alas it has shamelessly repeated the pattern across the continent, bailing out bankers when they, along with spendthrift governments, ought to have suffered default, as is the textbook case where a bondholder cannot repay. To countenance default was to suggest possible weakness in that flawed political instrument of finance, the Euro. The EU’s fear of undermining its hubristic monetary folly now threatens the European project itself as the cancerous contagion of economic collapse has grown.
Tragically, for all the summitry, for all the talk of reform, actually nothing has been achieved during the past six years. Few, if any, economies have indulged in any meaningful reform while large nations such as Germany and France have ruthlessly defended their national interest. Now the problem has moved full circle. The unreformed on the Mediterranean are struggling to survive, stranded with vast debts from big bureaucracy and big government...The toxic time bomb of impending default ticks loudest of all in Paris. A 40th consecutive annual budget deficit is destroying France’s third way socialist delusion, aided by that even more hapless than usual Elysee resident, President Hollande. Across the border, German growth is stalling - which is hardly surprising… After all, Europe is a train wreck of long standing fiscal incompetence. Eastern neighbors such as Russia are reluctant importers from a hostile West, while in China the long boom is much more muted than it has been for many years.
As soon as German growth data slipped last month, a certain realization began to dawn in Brussels - the EU has not even bought a strong roll of duct tape to bind together the glaring fiscal fissures it has been denying for years. Now the European Central Bank may hit the panic button - sloshing ‘funny money’ (Quantitative Easing) into the system. This action elsewhere has, to date, only served to generate vast asset inflation - aka making the rich richer without delivering coherent prosperity for all.
Every day government avoids acting to genuinely reboot the economy is not merely another day squandered for the lost generation, it marks one more sleep until we hit code red. The 28-member supranational state of ‘Kickcanistan’ cannot survive what is, at best, a status quo of stasis.
Europe may be about to hit the panic button - the only result will be: panic.
The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.