Europe Breakup Forces Mount as Stalwarts Regret Losing Relevance

Source: Bizweek
Thomas Bellinck, a Belgian theater director, has put a date on the European Union’s collapse: 2018.
The doomsday timeline of his Brussels exhibition called “Life in the Former EU: Final Years of the Long Peace,” presented the bloc’s six-decade run as a peaceful interregnum before the continent’s relapse into nationalism, an interlude where technocrats were too focused on regulating the diameter of tomatoes as their experiment in multinational democracy withered.
“We need national politicians who are either prepared to defend the project and redo it or admit that they don’t want to do it,” says the 30-year-old Bellinck. “But now we have something in-between.”
What the EU’s founders in the 1950s intended as “ever closer union” now risks going in the opposite direction: Britain is threatening to secede; the euro, battered by the four-year debt crisis, remains at risk of splintering; anti-euro forces are advancing in France, the EU’s heartland; separatists are pushing to burst the U.K., Belgium and Spain.
Economic lethargy combined with a deepening political quagmire and mounting debt load as leaders struggle to tame the legacy of the financial crisis risk condemning Europe to lag further behind emerging powers like China. Europe’s global heft is eroding: the euro zone’s share of global gross domestic product has fallen to 13.1 percent from 18.3 percent when the currency was forged in 1999, according to International Monetary Fund data.

‘Quite Delicate’

“The situation is quite delicate, but the scenario of the disappearance or crumbling of Europe is not real,” Romano Prodi, a former Italian prime minister and European Commission president, said in an Oct. 14 telephone interview from Bologna. “For the short and medium term, to become more and more irrelevant — this is the real risk.”
It’s not the only scenario. Collapse, slow decline, or renaissance are the EU’s three alternative futures, a U.S. intelligence analysis argued last year.
Dissolution of the world’s largest market — with 507 million people in 28 nations and economic output of $17.8 trillion — wasn’t the base case of the U.S. spy agencies. Their “Global Trends” paper — released on the same day in December 2012 as EU leaders accepted the Nobel Peace Prize in Oslo — found a “low” likelihood of collapse, in which the euro and European single market fragment and civic order breaks down.

Federalist Utopia

Equally unlikely is a federalist utopia sketched out Oct. 3 by European legislators led by Guy Verhofstadt, a former Belgian prime minister. Turning the Brussels-based commission into the bloc’s government, imposing EU-wide taxes and gutting national vetoes over EU policies are non-starters in virtually every capital.
“What we see all over Europe is more nationalization of policy instead of more federalization,” said Elina Viilup, a former EU Parliament adviser from Estonia who is now at CIDOB, Barcelona Centre for International Affairs.
Instead, Europe is living through what the U.S. spy report dubbed “slow decline”: the commission expects the 17-country euro zone to shrink 0.4 percent in 2013, lagging behind the U.S. for the fifth year. The Pew Research Center called the EU the “new sick man of Europe” in May after its annual poll in eight countries showed a drop in the bloc’s favorability rating to 45 percent from 60 percent in 2012.

Corporate Shifts

The malaise extends beyond politics. German software maker SAP AG (SAP) is morphing into an ever-more U.S. company, having spent $12 billion on takeovers in California’s Silicon Valley since 2010. Fiat SpA (F), owner of Chrysler, got 75 percent of its 2012 operating earnings from North America, with CEO Sergio Marchionne considering a primary listing in the U.S.
Creditors led by Germany have committed 496 billion euros ($679 billion) to fight the debt crisis, expecting all of it to be repaid. With unemployment at 27.9 percent in Greece and joblessness in the under-25 bracket as high as 56 percent in Spain, the human and political costs are harder to recoup.
The political radicalism that ensued isn’t limited to the economically distressed Mediterranean rim. Across Europe, movements that define themselves as against something — the euro, austerity, the perceived European superstate, banks, U.S.- style capitalism, foreigners, Islamic extremism or just politics as usual — are making headway, echoing the gains by the Tea Party in the U.S.
“The rise of extremism and populism is an enormous concern for the EU,” Luxembourg’s Viviane Reding, the EU’s justice commissioner, said in an Oct. 9 EU Parliament debate. “It fuels racism, xenophobia, homophobia, all forms of intolerance.”

Protest Movements

The euro area’s lowest jobless rate, at 4.9 percent, didn’t prevent a party trumpeting the slogan “Austria First” from capturing 20.5 percent of the vote in September’s election there. Italy’s Five Star Movement, a protest group headed by Beppe Grillo, a former comedian, picked up 25.5 percent in February with a message blending environmentalism, civil rights and rejection of the traditional elite. Doubts about the euro are part of the Five Star package, since Italy has gone backwards during the euro era: Italian economic production per person is now 91 percent of the euro-zone average, down from 104 percent when the currency debuted in 1999, EU data shows.
Globalization’s discontents are dominating the conversation in France, where National Front leader Marine Le Pen is turning what her father started as an anti-foreigner clique into a mainstream force. “Economic patriotism,” ditching the euro and casting off “the dictates of economic policy from Brussels and Berlin” form the credo she has used to siphon votes away from established parties.

Soviet Example

The EU will “crumble like the Soviet Union,” Le Pen said in an interview published Oct. 15 with Agence France-Presse, RFI and Liberation. “We are the 5 percent of the world’s people with no control over our economy or currency, or over the people circulating on our territory.”
Le Pen has had a good month. An Oct. 3 TNS Sofres poll ranked her as the country’s third-most-popular politician, followed by an Oct. 9 Ifop poll showing her party in front nationwide for the first time. A breakthrough at the ballot box came Oct. 13 when the National Front won a by-election for a regional council seat in Brignoles near the Mediterranean coast, prompting panic and finger-pointing between the two traditional parties, President Francois Hollande’s Socialists and former President Nicolas Sarkozy’s UMP.

‘Deluded Idiot’

Britain’s contribution is the U.K. Independence Party, which makes a U.K. secession from the EU and curbs on immigration its raison d’etre. Headed by Nigel Farage, a former commodity broker who once called EU commission President Jose Barroso “a deluded idiot,” UKIP tallied 10 percent in this month’s YouGov poll, making it Britain’s No. 3 force.
Facing those headwinds, Prime Minister David Cameron gave in to the anti-EU wing of his Conservative party and promised to put Britain’s EU membership to a popular vote in 2017, assuming he is re-elected in 2015.
For now, the political center has a tenuous hold on European affairs. National unity coalitions run Greece, on financial life support since 2010, and Italy, seeking to escape that plight. The anti-euro forces that did so well in Austria put on a weaker showing in Germany a week earlier, getting 4.7 percent and missing out on seats in the Bundestag. Chancellor Angela Merkel is moving toward negotiating a unity government with her traditional rivals, the Social Democrats.

Parliamentary Elections

Next May’s elections to the EU Parliament are shaping up as a continent-wide referendum on where the EU is going. Declining turnout — from a peak of 62 percent in 1979, the year of the first direct balloting, to 43 percent in 2009 — makes the Parliament susceptible to protest votes, turning the home of European democracy into a sounding board for anti-EU populism.
The European elections are sure to rattle the government of Greek Prime Minister Antonis Samaras — if it survives that long. Samaras’s New Democracy has 22.7 percent support, virtually tied with 22.5 percent for the anti-bailout Syriza party, according to a Marc SA poll for Alpha TV on Oct. 11. In third place with 7.1 percent is the anti-immigrant Golden Dawn, now with three of its leaders jailed for alleged hate crimes.
Three other elections threaten to remake Europe in 2014.
Voters in Scotland will decide in September whether to break away from the U.K. Catalonia, Spain’s biggest economic region, may also hold an independence ballot. Belgium holds a federal election in May with a separatist party likely to be the top vote-getter in the richer Dutch-speaking Flanders region, renewing debate over whether the country will stay intact.

Secessionists’ Fate

One reason for secessionists to think twice is that the setup of a new regional state would propel them out of the EU, cutting them off from European consumers, employers and investors.
Recession, fragmentation and retreat are far from what the framers of the EU’s first-ever constitution had in mind at the start of the millennium. With the euro in place, the EU set to expand to eastern Europe and U.S. vulnerabilities exposed by the Sept. 11 attacks, European leaders launched a constitutional convention in late 2001 with the question: “Does Europe not, now that it is finally unified, have a leading role to play in a new world order?”
More than a decade later, the interim answer is: no, or not yet. The constitution was torpedoed by French and Dutch voters in 2005 and resurrected in scaled-down form in 2009 as the Lisbon Treaty. The euro’s wobbles have questioned a half-century of economic integration. The crisis buried the myth that the currency was a one-way street, with no exit clause. Greece was threatened with expulsion in 2011 and Cyprus careened toward the precipice this year, only to be saved at the last minute.

‘Historic Moment’

“The situation is quite fragile, not only for Greece,” said Anna Diamantopoulou, a former Greek government minister and European commissioner. “It is a very historic moment. We cannot go step by step any more, we have to jump. What is important now is to overcome this gradualism.”
Making that leap rests with Germany, thrust by the debt crisis into the role of Europe’s reluctant leader with Merkel as the indispensable decision-maker. To many, Merkel has exercised the wrong kind of leadership. German-inspired emphasis on deficit reduction is opposed by 60 percent of Europeans, according to an EU-wide Gallup poll last month. While 94 percent of Greeks demanded alternatives, so did 50 percent of Germans.

Reluctant Leader

To others, even in a country invaded by Germany in 1939, Merkel’s leadership is too reluctant. The trained physicist’s case-by-case approach prompted Polish Foreign Minister Radoslaw Sikorski to label himself as the first top Polish diplomat to fear German inactivity more than German power. With Merkel’s tactics validated by her party’s biggest electoral score since 1990, boldness isn’t likely in her third term.
“The danger of German aggression is about zero, the danger of German inactivity stands extremely high,” said Brendan Simms, a professor of the history of European international relations at Cambridge University and author of “Europe: The Struggle for Supremacy” about Germany’s pivotal role. “What you don’t have at the moment is the visionary chancellor who will set out a roadmap and a project. It’s just surviving from moment to moment, which is a lot better than nothing, but isn’t going to solve the problem in the long run.”
The duelling forces of union and disunion were summed up by Herman Van Rompuy, a former Belgian leader who became the EU’s first full-time president in 2009, in time for the financial crisis. When not chairing save-the-euro summits, Van Rompuy dabbles in haiku, a form of stylized Japanese poetry. His second haiku collection, published in five languages on Oct. 3, includes this meditation:
Winter slips away,
spring is still holding its breath.
Heaven has its doubts.