Europe’s triple trouble
DESPITE two disastrous world wars, and a debilitating Cold War, Europe rose like a phoenix to become the world’s most prosperous, stable and humane region. Its success was due, initially, to America’s generosity (the Marshall Plan) and military protection (under Nato); and, more importantly, to visionary European leaders who created an increasingly integrated and dynamic trade and economic union among Europe’s largest states.
As the authoritarian regimes in Greece, Spain and Portugal fell, their successors embraced the European Community as the avenue to prosperity and Nato as the guarantor of their security. The end of the Cold War, and the collapse of the Soviet Union, reunited Germany and brought former Soviet satellites — Poland, Hungary, Czechoslovakia — as well as former Soviet republics — Latvia, Lithuania and Estonia — into the European ‘home’. The fragmenting Yugoslav states followed. Turkey stood patiently in line to join the European Union. Even a beleaguered Russia sought economic and security cooperation.
Today, however, European complacency has been replaced by doubt and discord, as the ‘Old Continent’ confronts a triple crisis: economic, social and strategic.
Europe is the victim of its own success. European prosperity was fostered over the past several decades by the Single Market, enabling the lower-wage countries to grow through trade and investment flows. However, with the launch of the single currency, the advantage of the ‘poorer’, peripheral members of the Union was significantly neutralised. The more efficient ‘northern’ countries, especially Germany, became the dominant producers and exporters, within and from the EU. Growth in the periphery was maintained by the extension of credits (sovereign bond issues, bank loans etc). With basic necessities met, the money flowed mostly into non-productive sectors, like real estate and stock markets, creating ‘bubbles’ which burst once the contagion of the US sub-prime bubble collapse spread to Europe in 2008-9.
Today, European complacency has been replaced by doubt and discord.
Unable to service their debts, the peripheral economies were rescued by a series of huge bailouts constructed by the IMF, the European Central Bank and the European Union. They imposed the traditional ‘medicine’ of budget cuts and austerity on the debtors, drastically contracting their economies, escalating unemployment and lowering living standards. Most of them — Ireland, Spain, Portugal — have restored modest growth and maintained the hope (or fiction) that they will be able to pay back their debts eventually.
Greece was a special case. It had spent with profligacy. Its debts were enormous in relation to GDP. The initial bailouts were not well utilised. The economy, largely dependent on government spending, shrunk almost 40pc. Unemployment rose to 50pc. Pensions were slashed. Social services suspended. The Greek population revolted; electing the far left-wing Syriza party on an anti-austerity platform. Yet, Greece’s creditors did not relent in demanding further austerity to provide yet another bailout.
The collapse of the prolonged negotiations was unsurprising. Greece is now in default; its banks closed, and capital controls in place. A compromise appears more difficult than ever. A Greek exit (Grexit) from the euro is a real possibility. It will throw Greece into turmoil, severely damage the currency’s credibility and further impede European recovery. Europe’s economically induced social crisis has been exacerbated by three accompanying phenomenon.
First, the failure to fully integrate immigrant populations. They fester in alienation in European ghettoes and slums. Racial and religious tensions have percolated into mainstream politics.
Second, suspicion of and discrimination against Muslim communities appears endemic in the aftermath of 9/11, random terrorist incidents in Europe and the new fear of home-grown terrorism inspired by the Islamic State. This is compromising ‘democratic freedoms’ and the revival of fascist forces.
Third, with rising joblessness, the outcry against immigration has become strident. At the same time, refugees fleeing conflicts in the Middle East and Africa — conflicts largely created by the Western-aided overthrow of authoritarian regimes — are now landing on European shores and crossing its borders by the thousands. The majority of them are Muslims.
Europe’s economic and social challenges are now compounded by the new confrontation with a resurgent Russia. The confrontation was the consequence of the American strategic push to extend Western influence ever closer to the borders of Russia. Europe played a willing but supporting role. Ukraine was a known red line for Russia’s President Putin. Russia’s takeover of Crimea is irreversible. Ukraine is likely to remain divided and turbulent for the foreseeable future.
Europe is bearing the brunt of the economic fallout from the reciprocal sanctions, interruptions of Russian gas supplies, and lost contracts. Some European companies are unwilling to pay the price and are openly circumventing sanctions. Several EU members — including Italy, Greece and Hungary — retain close relations with Moscow.
Europe’s old security fears have been revived by Russian air and naval patrols along Nato’s edge. The Baltic states are near panic. Unlike the past, Europe and Nato are ill prepared to confront a newly muscular Russia. Most European Nato members are unwilling or unable to increase defence spending up to the Nato norm of 2pc of GDP. Some, such as Turkey and Greece, have no desire to confront Russia. The US, preoccupied with the Middle East and a rapidly rising China, is unlikely to deploy the large numbers of troops it had in Europe during the Cold War.
Europe is in the midst of major and multiple transitions. Internally, political opinion is swinging to the left and right extremes. There are differences within the EU and Nato on economic, social and security policies. Questions are increasingly raised, including in the UK, about the advantages of the European Union. There is also a growing distance with the US on security policies, especially relations with a resurgent Russia and a rising China.
How Europe addresses its triple crises will shape its future and the nature of world politics in the coming decades.
The writer is a former Pakistan ambassador to the UN.
Source: Europe’s triple trouble
Published in Dawn, July 5th, 2015