Europe's Crisis

Stanley Kober

Monday, March 02, 2015

Europe now faces several serious challenges.

The first is the economy.  “Its own survival requires that Europe gets the young back to work,” IMF Managing Director Christine Lagarde stressed in a speech last July.

Europe is now engaged in a tug of war between two contrasting approaches, which can be defined as austerity v growth, or in the current context, Germany v. Greece.  The background of these competing approaches is the high debt to GDP ratios now affecting members of the EU, and how to get those ratios down.  Those favoring austerity believe expenditure must be slashed; they are focusing on the numerator. Those favoring the other approach want more expenditure to promote growth; they are focusing on the denominator.

The economics of the issue are now compounded by a political element: democracy. The new government of Greece argues its people just elected it on a new mandate, and the democracies of Europe should respect that democratic choice.  The countries favoring austerity reply they were also elected, and their people insist previous agreements be honored.

A question confronting the EU is how it can honor the wishes of its peoples when they divide along these lines.  Will the people of the side that is overruled accept their defeat, or will the crisis escalate?  “  It is unwise to put a democratic government between a rock and a hard place,” Pablo Iglesias, the head of Spain’s Podemos party, wrote in the Guardian on February 11.  “The wind of change that is blowing in Europe could become a storm that speeds up geopolitical changes, with unpredictable consequences.”

The second problem is the security situation.  The conflict in Ukraine has led to a growing confrontation between the EU/NATO and Russia, which in turn is raising concerns about a return to the Cold War.  In this regard, it is worth noting that a recent press report by the Russian agency Sputnik described the Shanghai Cooperation Organization, which includes Russia and China as full members, as a “military alliance.”

Another security problem is the Islamic state, which now has a presence in Libya.  The terrorist threat is compounded by a humanitarian tragedy, with large numbers of refugees fleeing violence and deteriorating economies.  Because of its emphasis on human rights, the EU cannot just push these people back, but the challenge of dealing with so many refugees, especially at a time of economic stress in Europe itself, is compounded by the realization that the Islamic state will try to infiltrate people among these refugees.

Given Italy’s location, it will be a major focus of Europe’s response to this problem.  The support it receives, both military and financial, will have a major impact on the future prospects of both the EU and NATO.