What Do You Think?

Europe is dealing with major economic issues that are threatening the survival of the European Economic and Monetary Union (EMU) and the whole European political project.

The historian Niall Ferguson points out that a monetary union requires economic and thus political centralization:

Is to follow through the original logic of monetary union. If you go back to 1989 Delors report it was explicit that one consequence of monetary union would be central control of national budgets, of national policy. And that is ultimately the crucial staging point for a federal system of the sort that you have here in Canada.

So if this logic is correct, then for the EMU to saved it will require further political and economic integration.

Do you think that the current situation in Europe will lead to the break up of the European Monetary Union or do you think that it will try to be saved. My opinion is that there will be further political and economic integration as the cost of not doing this would be too economically costly for Europe and the rest of the world.

EU Update

Bad news out of the EU has been driving global worries over another financial crisis and this has been a contributing factor behind the volatility in the stock market the past couple of weeks. What happens in the EU will affect the U.S. and global economy to a great extent. A note of interest is that the U.S. is already bailing out the EU. It appears as if the great EU political project is falling apart. This is not the case according to a lot of market analyst:

'The default position is more integration, which is why commentary, especially that coming out of the US, is very focused on euro break-up is biased towards thinking about the downside scenario, and is not really thinking about the upside scenario,' he told CNBC.com. 'The upside scenario I think is one that's more consistent with the history of European projects.'[...]

'When people ask us 'is Greece going to leave the euro?' our immediate pushback is that Greece doesn't have the agency. It's not really Greece's choice – it's Germany's choice and it's France's choice,' Rahman said. [...]

However, he too said that stepping forwards towards integration, not backwards, is the far more likely scenario.

'Of course, it didn't happen in an orderly way, and now possibly it's coming in a disorderly way, because now everyone's realizing that you can't have a currency and a single market and communalized trade policy without also having more political cohesion and more fiscal union,' Techau said.
'Maybe, in the end, ironically, Helmut Kohl will be vindicated because the answer to the crisis is either disruption, or another bold step towards integration,'[...]

The most noise seems to be coming from commentators who believe in disintegration, but those who really understand the inner workings of the EU say the opposite: economically it does not make sense, technically it is exceptionally difficult and politically it is nearly unthinkable.

One of the legacy of this global financial crisis will be a more economically united globe. This economic crisis is going to force some politicians and nations to do things that they otherwise would not do: like integrate further into international governing bodies.

European leaders are being pushed into closer fiscal union sooner than they had anticipated by volatile markets concerned over a dearth of ideas on how to solve the sovereign debt crisis in the euro zone, analysts and investors told CNBC.[...]

'If you believe the United States of Europe is stronger than the individual nations, it's simply a step that the politicians have been working towards, but now they're being pushed into it rather than managing the process,' Neil Dwane, chief investment officer for Europe at RCM told CNBC.

Over the weekend, German chancellor Angela Merkel seemed to soften her position on the issuance of so-called euro bonds, but she stressed they were not on the table for now.

'I think [Merkel] is just realizing that politicians are pushed by markets into solutions that politicians don't feel comfortable with yet,' Frank Engels, co-head of European Economics Research and Asset Allocation Strategy at Barclays Capital explained.
His comments reflected those made by Paul Donovan, deputy head of Global Economics to CNBC last week, who warned that markets would push European leaders towards "extreme action" and he called for the appointment of a European statesman to oversee closer fiscal union within the euro zone.[...]

'There is a sense that you have to move eventually towards a common fiscal union, a very coordinated policy approach on economic and fiscal policies, but not now, not yet because you need to lay the foundations in terms of political and legal infrastructure first and then later on move, that is the message [Merkel] wants to provide to markets,' Engels said.

It appears that the EU has lost, to some extent, "its power of decision over the direction that it is going". This economic crisis is the result of a government managed economies. The main instrument that the governments use to manage the economies of the world is through central banking and international governing bodies like the IMF/World Bank (both founded by a Fabian Socialist and a communist). The IMF/World Bank is helping to keep the socialist's dream of global socialism from falling apart in the case of the EU by continuing to bailout the failed nations that should be allowed to default. (A look into the history of central banking and the IMF/World Bank is illuminating.) These government institutions are helping to create an economic crisis that will push the world into a global-socialist-communist-governance. Well that sounds stupid doesn't it? The financial analysts take on the events happening in the EU point to the fact that the EU is being pushed by economic events into a tighter political/fiscal union. What has been the overall effect of the global economic crisis, larger and more united government(s) that are/is taking over economic functions once carried out by the private sector. The direction that the the world is a more in is that of a more united globe, economy and politically. I could state it in a more intelligent manner but that would take a lot more time and room.

The End of NATO? Visegrad Group Forms

With the fall of the Soviet Union in 1991, many predicted that NATO's relevence would disappear too, as the post-WWII threat to Europe's security had disappeared.  NATO did react to the 9/11 attacks on a member state (USA) by assisting America in Afghanistan.  NATO did not follow the US into Iraq, but it was a war of choice by the US and therefore, it could be rationalized that it was not a war requiring NATO assistance.  Many NATO countries (chiefly the UK as usual) did assist us regardless. 

Many Americans wonder why we have bases in Europe when there is no threat there, or when a perceived threat (such as a nuclear Iran or a resurgent-but-greatly reduced Russia) should be handled by Europeans themselves.  My own opinion at this point is that we should have Air Force and Navy agreements with European countries for bases to use as trans-shipment points, and to serve as a tripwire for US involvement should a really big attack happen, but that all major Army bases and most of the AF and Navy bases should be vacated.  It's time Europeans were responsible for their own defense.

Now NATO has initiated a war of choice with Libya.  I support the effort, but it certainly is not  a war that NATO was ever intended to fight.  This is even more a war of choice than Iraq was.  NATO is officially participating, but one of its main members, Germany, is not participating.  The US, after bearing the brunt of the early work has backed off to a support role, and it is now mainly a British, French, and Italian effort.  What exactly the point is, is not entirely clear, as has been pointed out in a previous RTP&GG post. 

Clearly, the original rationale for NATO, to protect European democracies from external threat, has all but disappeared and NATO is looking for a reason for being.  Even strong pro-military, pro-western democracy guys like me are wondering why it's still there.

A new development that has occurred under the media radar is showing that some NATO member nations still take NATO's original (and only) reason for being seriously, but that they don't trust NATO to serve that role.  Poland, Hungary, the Czech Republic, and Slovakia have formed a cooperative military group, focused on repelling a Russian invasion...the very thing NATO is intended for.  I'm pretty sure all these countries are recent joiners of NATO.  Doubtlessly, they read the tea leaves after Russia's bullying adventure in NATO-wannabee country, Georgia, saw NATO's ineffectual response, and are acting accordingly.  These countries, long-suffering under the Soviet boot in the Cold War, now worry very much about the Russians, and don't believe they can count on NATO to do the job it was expressly created to do.  As the article points out, they are worried that Germany is now focused economically on Russia and may not be greatly motivated to help out the smaller Eastern European countries,

The Germans obviously are struggling to shore up the European Union and questioning precisely how far they are prepared to go in doing so. There are strong political forces in Germany questioning the value of the EU to Germany, and with every new wave of financial crises requiring German money, that sentiment becomes stronger. In the meantime, German relations with Russia have become more important to Germany. Apart from German dependence on Russian energy, Germany has investment opportunities in Russia. The relationship with Russia is becoming more attractive to Germany at the same time that the relationship to NATO and the EU has become more problematic.

The formation of the Visegrad group is, in a way, heartening, as it shows individual countries forming alliances to meet specific threats, and not having to depend on the US to save them. For this old Cold Warrior, it's sad to see NATO coming to an end, but it's now an alliance without an enemy. Hard to justify. The US needs to approach things more like the Visegrad group, forming alliances with good friends for good reasons.

This also is one more step in the collapse of the vast transnational groups, and is heartening in that way too. The UN, long past its useful life, NATO past its useful life, the European Union in slow-motion collapse, etc. I don't know if the IMF is close to collapse or not, but the recent scandal involving its leader revealed to us that the head of the IMF was a Socialist. WTF?! I see approaching irrelevency there too.