Skip to comments.Europe on the brink of collapse
Posted on 11/04/2002 3:40:00 PM PST by wideawake
The Euro-zone is in a spiral of self-destruction as its crisis-hit economy heads from bad to worse
BY ITS own hand the economic life is being squeezed from Europe.
Collapsing confidence, tumbling stock markets and a sickly currency take second place to a spectacular public row between the president of the European Commission and the European Central Bank on whether the central pillar of policy is "stupid" or "indispensable for economic and monetary union".
Even by the standards of the "fudge and mudge" political culture that has long prevailed in Europe, it is hard to believe it has sunk to this.
Pork-barrel spending or utterly inflexible central bank rules: one or the other of these roaring dinosaurs will have to give. But in this epic battle it is the economic future of Europe that is giving first.
While this battle rages, the Euro-zone economy is going from bad to worse. It was hardly surprising that many missed the devastating one-word summary of the German economy by the countrys equivalent of the CBI last week: "catastrophic".
From the bottom to the top, but especially at the top, Europe is in a deepening mess. The international economic downturn has contributed to continental woes. But that downturn is not the cause, or the proximate cause, of Europes stunning reversal of fortune.
The cause is a self-destruction wrought by a political elite that has wrapped itself in fantastical self-delusion about the superiority of its economic system, the coming ascendancy of the single currency over the dollar, and the tide of wealth and prosperity that would inevitably flow from the relentless pursuit of "ever closer union". Here, on an epic scale, has been a procession of naked emperors who cannot begin to grasp why the world has stopped applauding.
For the Euro-zone, the applause stopped long ago. In the cacophony that passes for policy coherence there has come an absurd but utterly predictable result: far from the euro providing greater stability and a platform for better performance as its apologists claimed, the economies inside the Euro-zone are now faring worse than those outside.
This year will be the third in succession that the economies of the EU 15 have in aggregate outperformed the Euro 12. For this year and next it looks set to be the case that Britain, in GDP growth terms, is better off out. Those five economic tests behind which the government has hidden should be stripped away to show a glaring, humbling truth: if its economic performance you want, youre better off out.
Nothing has more exposed the myth of the superior continental economic model than the flight of capital out of the Euro-zone and the stock market collapses this year. They have been breathtaking in their severity. At one point this month the German stock market was showing a collapse of 70% from its peak, double the percentage fall in the Dow Jones. The full consequences of the destruction of savings on such a scale and at such a pace have only just begun to make themselves felt.
Barely a week now passes without another red pencil taken to forecasts for economic growth in the Euro-zone. Last Friday, it was the turn of the National Institute for Economic & Social Research. As if 1.4% growth last year was not slow enough, it now forecasts that the Euro-zone will only manage growth of 0.9% this year and 2.1% next.
As for Germany, which accounts for about a third of output in the zone, GDP will rise by only 0.4% this year, and by 1.7% next, a shadow of the subdued growth in America - the economy that Europe so despises. On Monday, the keenly awaited Ifo index of business confidence is set to show a further fall for the fifth month running. On top of slowing demand, German business now has to contend with a coalition that has proffered yet more of the disease as the cure: yet more tax.
It is not the world slowdown that has caused this performance collapse, but the interaction of entirely self-inflicted wounds: over-regulated labour markets, a relentless rise in the government share of the economy, a growing tax burden, regulation out of every orifice and a desperate rearguard action against all and every attempt to dismantle state aid and subsidies. The same clique that greeted the bursting of Americas new economy bubble as proof of the flawed Anglo-Saxon model is the same one that, now their own economy has fallen into a far deeper slowdown than that in the US, turns to blaming US policymakers for not doing enough to pull the rest of the world including the EU out of the mire. To listen to Europes political elite is to hear the pathetic cry of the bankrupt that someone else spent all the money. As for Germany, the powerhouse of the 1950s and 1960s has long given way to lethargy and laziness. Reds and Greens attack what is left of a once proud enterprise culture. They declaim their country in the Bundesrat like latter-day Tom Paines. But truly, it is they who pity the plumage and forget the dying bird.
Despite all this it has long been the belief of EU apologists in Britain that if only we engaged "at the centre of Europe" we would "win the argument" and slow the drive to ever closer union and ever greater centralism. But this is to ignore the fact that there are large sections of opinion in continental Europe that do not share the political and economic attitudes of the Anglo Saxon world one iota. Indeed, not even in the disintegration of the Growth and Stability Pact is there much cause for British reformists to cheer. It was Prodi no less, who repeated his call last week for "a single economic government for all countries that share the same money", with more power to the Commission to enforce a Stability Pact duly doctored to his liking.
This call was echoed by members of the EUs latest triumph of hope over experience, the Convention on the Future of Europe, whose economic committee called for the introduction of qualified majority voting on tax harmonisation and for strengthened economic co-ordination between the member states.
As the economist Stephen Lewis eloquently argues: "In the circumstances it is questionable whether UK ambitions in the EU are realistic."
In any event, there is no guarantee, he adds, that what emerges from the current crippling stand-off between Prodi and a European Central Bank that seems bent on holding out against interest rate cuts until the incipient recession has turned into the full-blown type, will be a substantial improvement.
It is the basic principles on which this monetary union rests that are deeply flawed. No amount of dissemblage about five economic tests makes up for the failure to recognise and attack the profound structural and conceptual flaws that lie behind this currency union and the crisis that has developed within it, one not of performance merely, but of survival. Here was a construct that was never an end in itself but an instrument intended to drive ahead towards "ever closer union" and it is that drive, and the Bonapartian vanity behind it, that is leading Europe to ruin.
Some take comfort this weekend from the news that Peter Hain, the governments "Mr Europe" has been moved to the Welsh Office. But the balance of influence in the Cabinet has moved if anything in favour of the pro-Euro camp. If that is good news, at least one does not need to look too far to see what bad news is like.
I also remember laughing out loud when I read it.
The whole thing was a pipe dream from the beginning.
Let's all hoist one for the Anglo-Saxon world.
Well I did also .. but sometimes like with children .. they have to learn the hard way
I'm just wondering when they'll start talking nice about us again .. cause you know they'll come looking for help .. they always do
Micromanagement of every little detail on the whole continent by a collection of bureaucrats in Brussels is only going to result in disaster. Either the Euro's come to their senses or they may fall for yet another demagogue.
Good news for America...
Not really; I'll wager that we are going to the same place that Europe is going, albeit via a slightly different route.
Sounds like they could almost plug in US stats for everything in that article.
I think the only losers are the germans, whose got shafted by converting to Euros.
In any event, I'm sure they're mad they don't have the dollar rendered worthless. They just might be running scared...no wonder they don't want to allow Turkey in. But then again according to several people on FR, Turkey never has tried to join the EU. In fact they got angry when I mentioned it. weirdos.
2000 EU population: 380 million
2000 US population: 280 million
2000 EU GDP: 6.4 trillion
2000 US GDP: 10 trillion
In other words, the average European produces $0.49 in value for every $1 an American does.
I'll back you up on that.
However, China is stealing our lunch in this department. We're only helped by the fact that the disease of socialism in our country is not in as advanced a stage as in Europe.
The only thing European companies have an advantage in, compared to the US, is tort law.
Different hand-cart - Same warm destination.
Boy, isn't that the truth.
Q: What do the europeans call americans who offer them advice about free-market economics?
A: cowboy redneck imperialists.
Q: What do the europeans call americans who are reluctant to bail them out of their latest economic/cultural catastrophe?
A: Evil isolationists
They may hate us, but in their hearts they know that we're right....and that they lack the cahones to emulate us.
And guess what? Oregon thinks the can do the same thing and make it work where everwhere else it has been tried that system has failed.
I heard that businesses and companies are going to flee the state and all the sick and disabled and every other kind of sickness and disease will flock there.
They'll all hold hands and have fun in Oregon until Noah enters the ark...then..
Keep those RAF spitfires warmed up. If the UK leaves that sinking ship, there is no telling what the continentals will do (does the UK have an emergency plan to flood the chunnel?)
They and Americans will be fine on one condition: that they have 2 children plus per family so they will survive. Otherwise Muslims will take their place.
All other things are details.
|Another socialist success story.|
I'll tell ya... Those people -- the Brits and Europeans in general -- make The Godfather Saga or The Sopranos look like a Saturday morning kiddie cartoon. Those people have some seriously nutty blood in their veins...
"Those people" are us. We live under the uniquely American delusion that we have no connection to the civilization that gave us birth: the West. In reality, we are no different; we just happen to be lucky in a number of respects in regards to our recent history. This isn't going to last. Europe simply has more history than we have; history doesn't move in a straight line. When we have had as many centuries of history as Europe has had, we won't be in any position to point fingers at them. In fact, our recent finger pointings are looking more and more hypocritical.
The future is Hispanic, Asian, African, Indian, Moslem, under today's trends. Maybe they'll be Republican?
No, but that's no problem to the usual suspects: they will simply redefine what "Republican" means. These are the same folks venting gas about Third World immigrants having "family values". Yes, in the sense that they outbreed us (and get support for same from our tax dollars), they have "family values". Islamic fundamentalists are very conservative and have "family values"; Latin American narco-terrorists and their Indian peasant supporters have "family values" (spiced with a little "liberation theology"); I doubt either of them are going to either be "Republican" or to otherwise do anything positive towards the survival of the West.
Got my population numbers and US GDP from the CIA World Factbook.
Whenever I go to Europe, I'm always fascinated by how akin I feel to them and how distant, simultaneously.
We will either quickly combust or be gloriously reborn, our culture is too fast-paced to replicate Europe's modulated decline.
"Sickly currency"? Are they kidding? The Euro is about to smash through parity with the dollar again, and I have made a fortune buying Euro futures this year.
The fact that it trades in the dollar's range is an embarrassment to the Eurocrats who had originally projected a $1.25 euro by now.
Leftists have no understanding of human nature and they lack comon sense. This will be their undoing.
You'll excuse me if I don't share your pessimism.
I honestly don't see it.
When you look at French or German bestseller lists, self-help books and books on football and cuisine are perennial winners. Not much different from Americans.
Martin Amis is no greater a novelist than Updike. Amelie is no more impressive a cinematic achievement than Moonstruck. An empty room with one flickering track light is no more profound than the Photorealist school.
The Europeans are no longer great generators of cultural artifacts - they are connoisseurs of their own and others'.
Their plastic arts and literature have been as degraded by postmodernity as America's.