THE BLOG

A Simple Solution for Europe

I'm on one of my regular global odysseys, and today leave London for Sao Paolo. My previous blog provided an ultimate solution for Japan, my first stop since leaving Honolulu.

I've traveled through Europe at least a dozen times over the years and have driven from Stockholm to Rome, did Eurail Pass a couple times and have experienced the PIIGS (Portugal, Ireland, Italy, Greece and Spain) on several occasions. I've given lectures throughout the European Union (EU) and, well, felt it was a timely moment for me to post an article about this political experiment, although most don't realize that the initial actual agglomeration occurred more than half a century ago, but it took the Maastricht Treaty to officially create the EU as such, less than two decades ago.

The EU is formidable. Both the International Monetary Fund and our CIA rank them as #1 in size of GNP, to #2 USA and #3 China. The population of the EU is just under 500 million, while that of the U.S. is 310 million. Most don't realize this, but the U.S. is a bit larger in area than China, and both are more than twice the size of the current EU.

There are 27 member states, but not Switzerland, with 10 others seeking entry, including Turkey, Serbia and Iceland. Addition of this group would send the population of the EU beyond 600 million, double the U.S., but still less than half that of China. There is an elected Parliament of around 750 members (the number keeps increasing).

Remember that the U.S. started in 1776 only with 13 colonies, which became our first states. Our population was 2.5 million. We have grown to 310 million and 50 states. The European problem is that they are all already grown up, in fact, actually declining. Here is what ails the EU:

- They have 23 official languages. They actually need to provide 23 different translated copies of documents at each gathering and must have 23 translators at plenary events. It's actually worse, as there 150 regional and minority languages. However, most meetings are in English, giving the United Kingdom a huge advantage.

- They have too many leaders, four, and therefore, no commanding power. Yes, the U.S. has the president, president of the Senate, majority leader of the Senate and speaker of the House, and coordination can sometimes be difficult. However, Barack Obama is where the buck stops. In Europe, you've got to wonder if Sarkozy, Merkel and Cameron really are the ones in charge, even though they are not even part of the EU leadership, for these country heads should be mere governor equivalents.

- Their "common" currency, the Euro, is fraying, with ten members not currently participating, including two of the three, UK and Sweden, on my current tour.

- There is that Muslim issue, with now a growing backlash, as Anders Behring Breivik revealed in Norway.

- They don't quite have their act together. Why, for example, isn't there one EU in the Olympics? Why does the EU have 27 votes in the United Nations? Well, I guess it's obvious that they have too much to gain by being separate.

We know about Greece. They have a debt to GDP ratio of 150%, not as bad as Japan at 200%, but worse than the USA at around 62%. The difference is that Greece is so risky, they need to borrow at 6%/year, while Japan and USA are at 3%. As long as inflation is controlled, all is well for the USA. Greece, though, was already "given" a trillion dollars last year, and has very little hope, even if they are bailed out again. While on the surface it seems tempting to let them go bankrupt and kick them out of the EU, the reality is that banks in Germany, France, and, even the U.S., could go down with Greece if the worst happens.

Of course, they are not alone. The losers are known by their appropriate acronym, PIIGS (see above). While Greece has an unemployment rate of 16%, Spain's is greater than 20%, with the inflammable "youth" rate getting close to 50%. Carsten Brzeski perhaps said it best, "It's not (going to be) a big-bang happy ending, it's not an American movie with a nice punch line at the end. This is probably kind of a European art movie, with a lot of suffering but in the end a rather gentle, happy ending."

That could well be an overly optimistic statement. While the general sentiment is that the European Union, unlike the Soviet Union (and what about China someday?) will not disintegrate, all is not well and getting worse. So what is my simple solution? Just hang in there!