The European Autumn

By Ken Feltman

“Autumn is a second spring when every leaf is a flower.”
-Albert Camus

Spain has become the third eurozone country in as many weeks to toss out its governing party. In the past year and a half, governments have fallen in the Netherlands, Slovakia, Belgium, Ireland, Finland, Portugal, Slovenia, Greece, Italy and now Spain.

Each country had unique reasons for change, of course, but there is surprisingly little agreement among Eurocrats about common problems. Brussels is filled with functionaries who are products of the good years in Northern Europe. Older now and moved to the larger stage – and the cocoon – that is Brussels, they are a bit out of touch and cannot grasp what is happening quickly enough to adapt without crisis, followed by crisis, followed by more crises. Americans, especially, can understand this phenomenon. It is playing out right now in Washington.

Years ago, these well meaning people designed broad social programs in their home countries. Unfortunately, many of their programs were based on population models that underestimated the aging of the population. Never mind, these well paid and well fed Eurocrats, once ensconced in Brussels, set out to spread the good life throughout all of Europe. We think we know the rest of the story. But do we?

Bernard Baruch said that every man has a right to his opinion, but no man has a right to be wrong in his facts. Europe, like much of the rest of the world, is awash in “false facts.” Sorting through the opinions, right and wrong, and separating out the “true” facts will be a long process. Europe needs to start that process to have the best chance to salvage not just the eurozone but the EU.

Begin with Spain

Spanish opposition leader Mariano Rajoy and his conservative Popular Party have won outright majority control of the government, and by a comfortable margin. The discredited Socialist government of Prime Minister Jose Luis Rodriguez Zapatero had introduced a web of social benefits and safety nets. The nets were ready just in time for the bottom to fall out of the eurozone’s economy. Too late, as Spain sank into debt and interest rates rose, Zapatero introduced cutbacks and reforms. Workers and the unemployed – more than 22 percent on election day – protested. The reforms failed to revive the economy and the election was called four months early. Zapatero faded in a fog of statements from aides, many echoing the old anti-Americanism. That may be effective in uniting people behind a leader or a cause, but is anti-Americanism an effective economic policy?

The Spanish mess, wide and deep, reflects the arrogance of the most extreme of the European left. Zapatero staffed his government with dismissive aides who competed to create each new program with more excesses than the last. For nearly eight years, these bright Eurocrats were so sure of themselves, so righteous – and so wrong. In the end, they proved that they have, at best, an uncertain understanding of the role of debt in an economy.

Perhaps that is understandable. For years, large billboards all over Spain told people that this new bridge or that new highway was being built with money from Brussels. Incidentally, the Obama administration brought out similar signs to proclaim projects funded with bailout dollars. Zapatero found out early what Obama learned late: When things do not work out, the signs become irritants. Of course, the signs irritated Germans and others from sounder economies as they drove to their holiday homes on the Spanish Mediterranean. Then, as the economy declined, the signs become a reminder to Spaniards not of the investment being made in their country by wealthier neighbors but that the Spanish economy was getting worse, not better.

On election day, a sign in a shop window summed up the anxiety of the frustrated, angry, confused voters: España no es Suecia (Spain is not Sweden.) True, and perhaps if Zapatero’s government had duplicated the discipline of Swedish social democracy, Zapatero would not be leaving behind such a mess. But there is another difference between Spain and Sweden: Sweden is part of the EU but not part of the eurozone.

Is leaving the EU easier to do?

While all the attention is concentrated on the country currently in crisis, important facts are neglected. For example, the news for weeks seemed to be about whether Greece would leave the eurozone, stay or be kicked out. Scant attention was given to the fact that it may be easier for a country to leave the EU than to leave the eurozone. Of the 27 EU-member countries, 17 are also part of the eurozone. Others want to be eurozone members and are putting their financial houses in order to qualify for admission. But of the 10 countries that are not, some have made the decision to keep their currency, most notably Euro-skeptic Britain, cautious Sweden and Denmark.

The Germans are the heart of the eurozone. At first blush, to expect them to continue to support failing economies seems unrealistic. But Chancellor Andrea Merkel is realistic. She knows that Germany will benefit strategically and economically from strong economies throughout Europe. She just has to watch the internal German politics of bailing out profligate countries with tax money from hardworking Germans. She knows, too, that the center-right government of Nicolas Sarkozy in France may fall next spring, bringing a Socialist government to power at what may be, for the EU if not for the eurozone, just the wrong time.

The 17 eurozone members have a huge investment in the success of not just the eurozone but the EU as well. Like it or not, the better-off countries may have to vote for EU-wide assessments or taxes to support and strengthen the weaker economies. Those EU members outside the eurozone will have less to say about any deal – but could be forced to pay up to finance any deal worked out by the 17. Naturally, the 17 want Britain and the others sharing the burden.

In effect, the non-eurozone nations will face a choice: Give up their currency and join the eurozone or keep their currency and have less influence on any deal – a deal that their citizens will help pay for. With France in crisis, Britons may decide that the whole EU is an experiment about to fail. They have been lukewarm to the concept of a “United States of Europe” all along. They like being head of a commonwealth, not one European nation among equals.

They may take the third choice, the choice usually unmentioned because it is so final. They may leave the EU. The other EU members would invoke provisions of treaties and documents to attempt to prevent the British exit. They already know that if Britain wants to go, Britain will go, leaving the EU hard pressed to achieve its goals of influence and economic stability. There will be no equivalent of the Civil War in the United States.

Meanwhile, reaching across the Atlantic…

While the news coverage is about Greece or Italy, Spain or France, and whether to allow defaulting countries to remain in the eurozone, people at think tanks and institutes in the United Kingdom, the U.S. and Canada are beginning to talk again about an old and often-abandoned idea: Stronger ties of unification between the U.K. and her former North American colonies. Discussions of this type seldom get beyond the talk stage, of course, and last heated up about 30 years ago, only to die out as the EU took form.

The British who met with their ideological counterparts in Washington last week had an interesting message: We notice that the U.S. is once again looking across the Pacific for partners and alliances. Why not look again across the Atlantic? This may be the last chance before the U.K., the U.S. and Canada settle into other long-term relationships.

(Full disclosure: Radnor has consulted with officials of the victorious Popular (People’s) Party of Spain, the governing UMP in France and the governing Conservative Party of the U.K.)

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About Radnor Reports

Ken Feltman is past-president of the International Association of Political Consultants and the American League of Lobbyists. He is chairman of Radnor Inc., a political consulting and government relations firm in Washington, D.C. Feltman founded the U.S. and European Conflict Indexes in 1988. The indexes have predicted the winner of every U.S. presidential election beginning in 1988, plus the outcome of several European elections. In May of 2010, the Conflict Index was used by university students in Egypt. The Index predicted the fall of the Mubarak government within the next year.
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