1. Scenarios for Europe or perfect disaster movie
Last week GIS published a report on Europe’s choices when it comes to its global position. Now we want to look at scenarios for what could occur within Europe.
After the extreme changes and devastating wars Europe experienced in the first half of the 20th century, in the second half the continent was on a nearly constant upward trajectory. First, countries in its west came together peacefully within the European Union. Later, the implosion of the Soviet Union gave several countries in Central Europe the freedom to join the bloc. From 1950 to 2000, Europe enjoyed peace and increasing prosperity.
- With the collapse of the Soviet empire, Europe believed it was entering a phase of everlasting peace. Defense was no longer considered a priority; economic growth was taken for granted and the welfare state grew.
- The first real cracks in the facade began to show in 2008 when the financial crisis made several deficiencies clear.
- The financial crisis was not the cause of the problem, but a symptom. The lack of fiscal discipline led to the sovereign debt crisis, which started in 2010. The recession that had begun a year earlier was also due in large part to an insufficient number of new innovative enterprises. The economic malaise was mainly caused by excessive government involvement in the economy and overregulation – a combination which limited innovation and investment.
- Europe’s poor footing in defense and foreign policy paralyzed it during the Ukraine crisis. These difficulties, along with the chaotic fiscal scene, had not yet been resolved when the migration crisis surfaced in 2014. All this had been foreseeable for more than 10 years, but the problems were not addressed in time.
Unresolved issues based on failing foresight
In 2016, the deteriorating economy, tension with Russia and the migration crisis all dominated the political scene. These issues remain unresolved and are jeopardizing the EU’s – indeed all of Europe’s – ability to be successful. Brexit was a drastic example of Europe’s inability to address real problems efficiently. The United Kingdom’s vote to leave the EU showed the lack of leadership and insufficient sense of political responsibility on both sides of the English Channel.
The Brexit vote was one of two important referenda in Europe in 2016. The other was in Italy, where the population rejected then Prime Minister Matteo Renzi’s proposed constitutional changes. Both brought surprises and both resulted in a vote against the political establishment. Europe will have two decisive elections in 2017: the French presidential elections and the German federal elections. Europe’s political establishment is paranoid about what it calls new “radical” movements – but they are not the real problem. The more substantial threat is the unresolved issues which the people of Europe see and rightly fear. By refusing to address them, the political establishment makes the radical movements possible.
Europe’s population realized long ago that the “feel-good society” had run its course
More responsible sections within the established parties had pointed out these challenges, but were silenced. Now, the radical parties might even be necessary to shake up the scene and open the path for real reforms. Europe’s population realized long ago that the “feel-good society” had run its course, but governments still maintain a Potemkin village of a functioning welfare state. Europe became very protectionist through many regulations, while the drive for internal harmonization jeopardizes local habits, customs and traditions. That is something people simply do not want.
As a result, the EU’s internal cohesion is weakening. The clearest example is Brexit. But other groups within the EU, especially the Visegrad Group and the Nordic countries – which have played a very positive role – feel uncomfortable with the idea of an ever-closer European Union. Anti-EU sentiment is also strengthening in places like Italy, which has struggled with the euro as its currency, and France with its onerous debts.
The basic problem of Europe is a lack of leadership. Within the EU, the tail is wagging the dog. The initiative should come from the European Council, which represents the member states. However, the technocratic European Commission, with its desire to regulate and dominate, has become the strongest body. It is interesting to note that the public sees little of the European Parliament and the Council. Commission President Jean-Claude Juncker is widely recognized as “Mr. Europe,” when
in fact he only represents the EU’s executive body.
If we look ahead to short-term scenarios for Europe, we see that the deficit and sovereign debt crises will not be resolved. The year 2016 showed the end of austerity, which was made possible due to the expansionary monetary policies of the European Central Bank. Economic growth did not follow, but it did buy time for governments – time which unfortunately was wasted instead of used to implement the necessary reforms. The Italian banking crisis has brought the debt crisis to the surface again – it will continue throughout the next few years across Europe.
The dire situation will become worse in 2017, with harsh consequences. We know from history that injecting artificial liquidity has never led to sustainable economic prosperity. The excessive liquidity provided by the ECB, combined with zero interest rates, will inevitably destroy private households’ savings and pensions. Unless courageous action is taken soon to reduce government influence in the economy, these savings will be wiped out. The resulting unrest will likely topple all of Europe’s current political elite.
Prince Michael of Liechtenstein
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*YOUTUBE — 2017 Annual Forecast Preview . Stratfor Vice President of Global Analysis Reva Goujon highlights the key geopolitical trends for the coming year.
*YOUTUBE — Ethnic European Nationalism. This video shows the various European ethnic groups seeking independence from seperate countries