Europe's Dilemma - Putin's Blessing in Disguise

02/11/2015 12:54 pm ET | Updated Apr 12, 2015

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Co-authored by William Witenberg a contemporary artist focused on abstract painting

It is hard to believe but bonds issued by the governments of Austria, Switzerland, Denmark and Germany are offering negative yields. This means that at the maturity of the bond an investor will receive less than invested. These bonds guarantee, in effect, investors lose money if they invest in them. They are the boldest symbol of the European Union's most troubling time and some argue they are the canary in the proverbial coal mine.

This odd, black swan market is caused by a variety of factors and is likely to have unintended consequences. Investors are, clearly not viewing the economic future for Europe in a positive light. Instead of investing in risky but higher yielding debt instruments investors are, in effect, putting their money in their mattresses. They fear anything but the safest investments. The difference between the economies in the European Union has never been wider. The German economy is running at a budget surplus and Spain and Greece are verging on bankruptcy.

The consequences of lower oil prices on the Russian Economy have been well documented. With Russia suffering a slowdown at the same time that the European Union's economy is further straining ties between European countries it is not surprising that the Ukraine situation has not changed in the last six months. In the meeting Monday between German Chancellor Merkel and President Obama, Chancellor Merkel made it clear Germany was not going to send weapons or use any new means of attempting to influence Putin. Obama made it clear that U.S. policy towards Ukraine was secondary to American European relations.

While it is not stated in these terms Europe is simply too busy with its own economic problems to assist the Ukraine government. While conservative forces in America are pushing Germany to expand money and military assistance to Ukraine to stop the separatist movement in East Ukraine, Europe made it clear they have no interest in such an escalation. This rejection must be seen in the light that Germany and France are aware that the new Greek government's rejection of austerity and the weak economies of so many European countries threaten the very existence of the European Union. The separatist movement in Ukraine is simply not as important as resolving the economic problems, that threaten the very existence of the European Union.

None of the European economic turmoil can be lost on Putin. With economic malaise comes discontent in many countries that have ethic Russian populations. What better time for Putin to reach out and support Serbia, Montenegro and the Serbian part of Bosnia-Herzegovina? Despite unemployment in those countries being in excess of 25% European investment is not coming but Russian support is. In the region only Slovenia and Croatia have been integrated into the European Union. It is not likely with the weak economies of Europe that the European Union can afford to admit the other western Balkan nations.

All of the above plays into Putin's goal of preventing any further western gains in Eastern Europe. The negative yielding bonds show how weak the European economy and psychological capacity of Europe is to stand up to Putin. The problem for Germany now is not Russia but how to deal with Greece and the weakening economies of European countries.