Europe at the Crossroads

Europe does not really exist. Despite the best efforts of several generations of politicians to create a strong sense of a united Europe, it remains a fragmented, divided and often difficult place. Made worse, at least at the moment, by the political theatre being played out against a back drop of real hardship and squalor.

Poverty is growing in Europe. In part this is because many were in transition still from a former Soviet style economy to a more market driven economy and are now in the process of finding that they are living in a growingly socialist Europe. The rules that were in force just a year ago are no longer the rules of the game and this has caught many out, leaving them homeless, without work and in poverty. But it is also a consequence of the “green” policies forced on many countries by the European Union – policies that have increased energy costs and the number of people who now live in energy poverty.

It is also a very divisive place. The free movement of labour has meant that many of the “new” workers in Britain, for example, are from Poland, France and Germany have been, for many years, dependent on immigrant labour. At a time of high unemployment, this creates some tensions. There have been street protests in Britain demanding “British jobs for British workers”. Holland has found the growth of its muslim population difficult to deal with – it has led to racially motivated protests and assassinations.

Corruption is also rife. The black economy has grown in Europe as the complexity of over-regulated and over-taxed business has got too much for many, who have taken to doing work for cash in a large and very effective underground economy. Corruption is also present in the work of government, especially the commission – the auditors of the EU have refused to sign off the accounts for several years on the grounds that many of the funds allocated to activities are not fully accounted for.

There is a lot of cynicism. When countries were voting on the new EU constitution, it was defeated by a vote in Ireland. The EU has proceeded as if this did not matter and has enacted many, though not all, of the provisions of the constitution without a clear mandate to do so. There has been cynical manipulation of issues, especially the green agenda, for purely political purposes and the people of Europe are, in general, sick of it. There is waste, duplicity, duplication, denial and many other challenges, but by far the most serious is the lack of trust and palpable cynicism about the way governments now think about and treat citizens.

Then there is the gao between the rhetoric of Europe and the reality. Europe is commited to Kyoto, but does little about it. Europe is committed to eliminating poverty within the EU twenty seven member countries, but it increases. Europe is committed to transparency, but it is really difficult for ordinary citizens to find out what is happening. The disdain for politics is widespread and the lack of engagement of people in their European parliament is an example of this.

All of this shows itself in protests marches, small acts of defiance against EU regulations (of which there are legion), editorial columns in the media and law suits taken by individual citizens trying to stop the machine from rolling over them.

It also shows itself in the refusal of governments, especially France, to obey rulings of the EU commission – leading to defiance of orders from the European Court. Such defiance leads to fines, which they also do not pay each time they are handed down. Another source of cynicism.

These tensions and difficulties are writ large right now, as Europe lurches from one crisis to another. This week it is Ukraine, technically now bankrupt having defaulted on its IMF arrangements. Next week it will be the real disagreement of the European members at the G20 summit – it will be “papered” over, but the differences and disagreements are nonetheless real.

When Europe discovers the implications of the current round of “stimulus” spending for the debt levels of Europe and the requirement to cut programs and increase taxation, finger pointing and blame will be commonplace. Ireland already has debt equivalent to 11% of GDP and it has lost a major employer – Dell, which accounted for one in six jobs in Ireland. Spending stimulus money with a lowered tax base will lead to significant program cuts – politically difficult. This is why Germany is backing away from spending more and from “bail out” funds for struggling industries.

This will translate into significant reductions in social spending and increased consumption taxes, which is why the EU as a whole is angry about the UK’s decision to cut VAT (the equivalent of GST in Canada). I suspect that some fundamental questions will also be asked about Europe and its future. The fact that it is truly leaderless and disjointed will make the EU vulnerable. It will be an interesting place to keep an eye on.