Reading most of the pundits and comments about Europe in the United States, there seems to be a fashion: Euro-bashing has become a way for look smart and ridiculing the continent is conventional wisdom.
The dangers of that approach are obvious: turning fashion into conventional wisdom, and ultimately self-fulfilling prophecy. The underlying current of those generalizations is that Europe is like the United States, an aggregate of countries who, under the beautiful flag of the European Union, act as some sort of a federal state. This misconception is doomed to disappoint the United States. Europe is 29 independent countries bound by a challenging common project: integration.
There is no European president (Mr. Herman Van Rompuy is the president of the European Council, one of the five EU entities who has a President). The European Commission is not a Government. The European Parliament is not a final decision maker and each national Parliament has to approve each piece of legislation. Treaties sometimes require in some countries a referendum that proved to be an oxymoron and sometimes a casino. The heads of state and government of the member states are the rainmakers, and saw their power increase during the two financial crisis.
That should be sufficient to make it abundantly clear that the decision process of the European Union and the Eurozone is neither federal nor integrated. The United States know that, if they want to be effective, they need to include this complexity in their handling of the European Union. It makes Europe a multifaceted ally and partner, and attempts to deal with it as if it was one miserably failed whether in foreign policy (the attitude towards Irak, Iran and Afghanistan to name one), in economic decisions or regulatory initiatives. While the G 20 has one seat for the United States, as many as seven presidents or prime ministers represent Europe.
That, however, does not make Europe a lost continent. In a strange way, the European sovereign crisis and its disastrous mismanagement by European political leaders evidenced the need to revise the European decision process in times of crisis and in handling economic and
financial decisions.
Europe suffers from a deficit of trust in the eyes of the United States, and most countries. Canada this week decided not to participate to the European bail-out mechanism, neither should it, or the Chinese for that matter. The International Monetary Fund has been created to handle multilateral support of failing economies.
This week saw a further deterioration of the Eurozone creditworthiness. Italy issued $3.7 billion three-year bonds at 3.89 percent. This represents a 41 percent higher interest rate than on March 15. The inaction that plagued the Greek crisis seems to prevail for Spain and Italy, who are not at the center of the world financial concerns with a global indebtedness representing 10 times Greece.
What is the smart way to look at Europe from an economic and financial viewpoint? As an economic powerhouse that has a difficult and complex decision process, and a weak leadership.
It is Europe's weaknesses that represent opportunities for the United States in its global reach. Acquisitions, partnerships and investments are plentiful and available. European companies are seizing the opportunity to look at the United States as a land of opportunity again.
Realism is the rule of the game: those who are willing to integrate that complexity and rather than exporting the US model, recognize the cultural and institutional complexity of Europe have become very successful throughout the "lost continent."
Europe is not a lost continent, but a set of countries who are dealing with a crisis of confidence stemming from the awareness that its social system needs to be overhauled and modernized. The trade unions refuse to adjust to this new world and continue to ask for increases of salaries, refusing the extension of the age of pension. This social crisis will take years to be resolved because it is the end of the illusions of the current system.
It also happens to be a continent that has with the United States a multiplicity of historical, human, cultural, political, military, economic, financial and social links that create a unique intimacy.
Europe is not a lost continent, but is undertaking a major revolution of its broken system. Underestimating the challenge and joking about it makes no sense. It is a painstaking process, a necessary one, and a land of opportunities. If the U.S. could understand the magnitude of the challenge, a new partnership could be built across the Atlantic.
Follow Georges Ugeux on Twitter: www.twitter.com/Ugeux
Truely "European socialist" countries like Germany, Holland, Sweden etc. are among the strongest economic powerhouses. Simplified, their system consists of welfare based on high taxation revenue. It is the least "European socialist" countries of Europe with lowest taxation that are most like the US (overspending without sufficient tax revenue) that are doing worst. Take e.g. Ireland. A tax paradise from a European perspective. Now bankrupt. Take Greece. Overspent hugely and never collected tax properly at all. Now a smoldering ruin. Simply ordinarily capitalist financial mismagement. A nice example being the ....USA: overspending + insufficient tax revenue.
That countries like Holland etc. now apply cut backs is related to the fact they now have to bail out "failures" like Greece.Our systems have always adapted to the current economic situation. Take e.g. Holland again for the sake of argument. Overspent in the 70ties. Had to apply cut backs as a result in the 80ties. Overspent in the 90ties. Is now apllying cut backs again. Simplified, the issue is "how much will I get at this moment in time" and not "will I get anything at all anymore". It is an adapting, fluctuating system. There is not a single party in Europe, not even right wing, that would even consider getting rid of "European socialism" as it is accepted and even desired by the overwhelming majority of Europeans.
"Our broken European system" only exists in American reviews. Not in our European reality.
Isn't this inability for their own appointments not being able to do anything a clear reason for europe failing? Or is it because Germany is singlehandly holding up the entire EU? I do not know the answers, but I will ask them. I truly believe the EU will fail, and they will blame it on the U.S while still trying to say they are better than the U.S. (Also I have been to Spain, France, and Germany within the last two years before you chastise me about not know how Europe is)
And making the EU more of like 'country' than just a union doesn't work, because the countries are very different, with different cultures and climates and whatnot, and you can't just generalise everything and make one pretty standard that supposedly fits all. What you can improve is the working together and to make things easier for people living near borders.
Europe is a continent? On the maps I've seen it looks like the western-most part of Asia.
A general misunderstanding most in the US have is that Europe is dithering with its debt crisis. But they are not dithering. Only in the Keynesian's mind are they dithering. Its just that northern Europe disagrees with the Keynesian approach of fiscal stimulus and printing money. They believe it takes time to readjust the imbalances that were created by cheap credit. They recognize that austerity and restructuring to remove impediments to growth will actually cause more pain in the near term, but that Keynesianism only kicks the can down the road, and will result in an even greater crisis a few years later.
High risk loans should have high yields. Interference with the market by the ECB perverts the market, bringing down the yields. This only enables continued profligacy. That action by the ECB has upset many in Germany, especially their economists.
If anyone wants to truly understand where northern Europe is coming from, read up on "ordoliberalism".
Blaming the victims was a full time job for lots of PR types in the US. Good to see they found new jobs.
Monetary union can only come about on the basis of political unity. Nations will have to completely give up their financial sovereignty to a single financial entity (a federal European commission or superstate) that controls monetary and fiscal policy. Or, Europe remains Europe with a few smart governments and many acceptable governments and a few loony (and fiscally irresponsible) governments.
Accept Europe for its diversity.
It may be perceived so from the outside, but I wouldn't subscribe to that. The European Union was never designed to be a kind of "United States of Europe". EU was, from the beginning, conceived to be a supranational union and not a federation. We are proud to be different and united in the same time. Every passport in the EU shows that we are both citizens of the EU and citizens of our nations.
Of course it leads sometimes to confusion, especially for people migrating across EU. But these are mainly bureaucratic obstacles and we are overcoming them. Our major problem is: we were so optimistic that we enlarged EU too fast. We should have taken much more time to ensure that our member states had a consolidated and steady economy before joining the Union and the eurozone.
Now we experience the first serious crisis. We will not manage it by giving up our identities. If we try so we will lose everything we have been working for during the last 30-40 years. We need to consolidate both our national and our EU policies. Above all, we need to cultivate our different but united identities. I can move to any 'foreign' EU country but I will still be the same equal citizen. Show me one place in this world where this is possible.
In short, until the so-called banking elites and their political cronies abandon the idea of currency union without monetary and fiscal unity, European leaders will continue to pursue the failed policies of the past, ones linked with restoring a gold standard. Ron Paul would be proud!
Yet, the failure of the Euro does not mean the European project (the EC) is in danger. Schengen, trade agreements, ease of movement of capital and labor, etc. mean that a large "domestic" market exists and can expand. The Euro responded to but one of the problems of the EC, the need to convert currencies, for tourists and companies. Is that advantage worth the destruction of European economies (Greece, Spain, and Ireland, Portugal) in order to preserve the trade gains accruing to Germany, Holland, etc. because of the drag on the Euro caused by economies on the brink of disaster? It's not so ironic that Jean Claude Trichet, former head of the ECB, also presided over the demise of the European Exchange Rate Mechanism. Until the banking and political elites stop trying to recreate the gold standard when national fiscal and financial systems are not integrated, Europe will continue to piss into the wind.
Sweden did have a banking crisis a few years before we did, and they nationalized all the banks, recognized them, and re privatized them with heavy regulation. That's why they are doing well.
The USA became the greatest economy in history with high personal taxes and heavy regulation during Ike's time.
Greece never did. Answering what countries like Holland, France, Italy, Germany do not manufacture is less difficult than what Greece does manufacture. Do olives and hotels count? Now, although the economic base is clearly not very impressive Greece borrowed, overspent and never collected as much as a nickle in tax. In the latter aspect it is very unlike any truely "European socialist" country, but very much like the US: borrowing, overspending, insufficient tax revenue to cover for expenses.
Basically, truely "European socialist" countries have always been economic powerhouses and still are. It is the least "European socialist" countries that are most like the US that are affected most by the crisis.
Further, Germany is not having anymore of a foreign workforce than any other country. As a matter of fact, many avoid Germany as it does not have minimum wages. An example being the asparagus business. Most Poles drive right through Germany to harvest asparagus in Holland (which does have minimum wages). This has lead to problems in Germany's asparagus business, as nobody was willing to work for their "slavery" wages.
That's the basis of the social democratic system.
A state capable of giving healthcare and free education (including university and university housing) means that their workers need less money to survive.
As such, workers agree to a lower wage keeping businesses competitive.
They also agree to control over striking action, leading to stability in their industries which makes them more competitive.
Businesses, seeing the positive aspects of the social democratic system, then agree to put in a lot of money into benefits, offsetting the costs to the government, increasing stability and decreasing the need for strikes or labour agitation.
They then pay high taxes to keep the system moving. They make less net profit, but are more competitive and stable than more capitalist systems.
At least, that's what I learned in university, and it seems to be proven by the success of the Scandinavian countries. So, at least, there it is about taxing the rich, but its also about more than that. Its about having a literal social contract between workers, businesses, and the government.