More Anglo-Saxon conspiracy

Eurocrats want you to know the crisis has nothing to do with the flaws inherent in the eurozone system. No, prominent (and normally pro-U.S.) German MEP Elmar Brok  calls it akin to a “currency war” in pursuit of “Anglo-American interests”. Former French president and father of the doomed EU constitution Valéry Giscard D’Estaing claims it is “a manufactured crisis … deliberately created by the financial markets, in particular Anglo-Saxon”.

All this begs the question: Why is the eurozone so vulnerable to this kind of attack (clue)? German newspapers, incidentally, don’t believe a world of this.

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Eurozone, the Unraveling (II): EU/euro support collapses across entire continent

One of the great underreported stories of the eurozone crisis has been the incredible damage it has done to the reputation of Europe, the EU and indeed the European ideal itself. This has occurred independent of the country in question’s membership status or aspirations. In doing so, the mangled management of the crisis, by both the Princes of the European Council and the supposed “experts” of the European Central Bank, has set back the cause of European integration years if not decades.

It’s true of the EU’s new members. In the Czech Republic, 70% oppose joining the euro. In Lithuania, opposition to joining the euro has risen to 49% as against 43% last year (43% are pro-euro today). In Estonia, one of the few part of the eurozone, 55% say they would choose not to join if the issue were raised today. A Wall Street Journal poll found that even among Poles (perhaps the most europhile in the entire EU) only 16% support joining the euro, notwithstanding the government’s commitment to do so.

In Scandinavia, never particularly favorable to the EU in the first place, support has reached abyssal new lows. In Sweden the same poll found 3.5% wanting to join and another that 87.6% want to keep the krona. In Denmark, less spectacularly, opposition to joining the euro in Denmark rose from 47.1% last June to 50.6% in September. In Norway, a very successful non-EU member, opposition joining the bloc has risen to a whopping 79.8%, while only 12.6% dare voice the opposite opinion.

Similarly, public opinion in the UK has now decidedly turned against Europe. Last October, as MPs voted against holding any EU referendum, both the centre-left Guardian and the hysterically little-English Express reported that almost three-quarters of Brits wanted a vote on EU membership. In addition, both also found about half would vote for withdrawal if one were held.

In the core itself, public opinion is not yet seriously considering a breakup of the eurozone. However, here too, the Council’s structurally-induced propensity for defective, hackneyed compromises and the New Recession have taken their toll. In France, 45% believe the euro is a “handicap” for the French economy and 44% say the common currency is “amplifying the crisis”. In Germany, 60% believe the euro was a bad idea and 37% say they would vote for a euroskeptic party.

All this is occurring in those countries least hit by the eurozone crisis. I’ve not yet mentioned those economies – Greece, Ireland, Portugal and Spain – which Berlin-Frankfurt-Brussels have slated for abolition deflation, recession and emigration. Here, the problem has reached a rather higher plane:  These countries are most likely to believe that the economic crisis is today Europe’s greatest security threat, ahead of terrorism (according to a Eurobarometer poll). In these places, the damage to the EU’s image may prove irreparable.

Europeans’ new euroskepticism is fundamentally different from that of the past. The EU, with the partial exception of migration rules, was not a tangible reality for most people until recently. How many, in their daily lives, could honestly say they’d noticed the 1% of GDP siphoned through Brussels or the obscure regulations for products  standards?

Today is different. The ordinary citizen doesn’t necessarily care for the details of new ever-more-roundabout bailout deals or the ECB’s monetary hocus pocus. However, s/he can see the pathetic spectacle of Europe’s assembled leaders failing again and again to address the crisis notwithstanding their pronouncements regarding “summits of last chance” and “solemn commitments”.

The EU was given the highest responsibility in one area, economic and monetary policy, in which it has now most manifestly failed with unemployment rising and double-dip recession a reality. And is there any issue more important to Europeans today than jobs and economic (in)security?

UPDATE: Great minds think alike? Michaël Malherbe of La Comm’ européenne published a post on the same day looking at pan-EU drops of confidence in European institutions according to the November 2011 Eurobarometer. The percentage of people for whom the EU evokes a “positive image” has dropped nine points, to 31%, since last summer. Graph!

Eurozone, the Unraveling (I): A recession for Christmas

We’ve reached a new stage in EU history: the most significant exercise in federalism – the euro – has in its current form caused a double-dip recession. This is a tragedy and a perfectly avoidable one at that. This slow-motion train wreck – to not speak of economic suicide – is worth documenting and understanding however, both given the devastation it will cause my generation in particular (youth unemployment, at 20% now, will also rise) and the shame it represents for all convinced Europeans.

So, in honor of Tom Ricks (author of Fiasco on the Iraq War, another avoidable tragedy of higher order), I’m launching this series of posts. I am, sadly, very confident there will be lots, lots more bad news to cover in the coming months (years?).

Eurozone and U.S. unemployment had largely run parallel one another during the first stage of the economic crisis, with both stabilizing around 10%. Now, the U.S. rate is rapidly dropping, reaching 8.6% last month, while the eurozone’s, after a modest decline, rose to its highest-ever figure of 10.3% in October. Deutsche Bank and Barclays are now predicting the eurozone economy will shrink 0.3-0.5% in 2012.

These are the consequences of 18 months of dithering, indecisiveness and denial by European leaders, and in particular those of Germany and the European Central Bank.

There is no indication the existing medicine of austerity, ECB inaction and attempts as social engineering entire nations into “competitiveness” via apatride bureaucrats (the IMF and Commission) will succeed now, any more than it did with Greece.

Nor is there any evidence of a coming change of policy: The Germans have now restated their rejection of ECB intervention, even in the event of a good fiscal union deal. Mario Draghi has already made this fairly clear even before the latest “last chance summit” (which I had the honor of liveblogging into the wee hours of the morn). Paul Krugman’s skepticism towards the optimists’ speculation (including my own) of “ECB intervention for fiscal union deal” was then fully justified.

Ironically, Berlin and Frankfurt’s ham-fisted approach to debt reduction and hard money is unlikely to achieve either objective.  I don’t need to emphasize the devastating effect shrinking economies and higher deficits resulting from unemployment will have on overall debt levels.

Economies like Italy, Spain, Ireland and Portugal – already on the verge of paying interest rates on debt so high it makes repayment a mathematical impossibility – will come even closer to defaults which would wreck the European financial system and wider economy. The debt-death spiral is already resuming after the (increasingly brief) post-summit calm: Italian yields are rising and the euro is now rapidly losing value.

There is no telling where this ends. What is clear is that existing trends are unsustainable and likely to get worse. Means there will be plenty to blog about and many more sleepless Council summits.

UPDATE: Talk of the devil, Eurostat has just come out with its estimate that employment shrank by 0.1% point in Q3 of this year in both the eurozone and EU27. It has likely gotten worse still in Q4.

Eurocalypse 101: Three articles for understanding where we’re at

For real this time!

The eurozone crisis appears to be heading towards some kind of climax. Haven’t we heard this before? Like ahead of every eurosummit of past two years? While a truly “decisive” solution appears impossible almost by definition given the nature of the European Council (vetoes/Germany), we are getting at a point where either the politicians actually change business as usual or everything falls apart. Or both.

Borrowing costs are rising across the eurozone, including “virtuous” governments like Austria and Finland, with even Germany now being forced to pay more than the UK. It is now clear Italy – if Brussels-Frankfurt-Berlin do nothing – will enter a debt spiral and default on its over €1.5 trillion of debt no matter what the new entirely-unelected government of bureaucrats in Rome does (and, no, actually crying while announcing your €30+ billion austerity cuts doesn’t help), dragging the European financial system down with it in the process.

If staring into the abyss of financial collapse has a way of focusing the mind, so does the fact that the eurozone’s (Merkel’s) dithering non-policies and repeated pseudo-solutions mean that Europe has effectively already entered a double-dip recession, with unemployment rising to 10.3%, the highest recorded since the euro’s founding, even as the U.S.’s has dropped to 8.6%. This, for a young European like myself whose generation faces over 20% unemployment, verges on criminal negligence.

We appear to be at a tipping point for EU leaders with for the first time serious talks of legal fiscal controls to be imposed from Brussels and, less certain, of decisive intervention by the European Central Bank. History, as José Manuel Barroso recently said, is “accelerating”. Economic disaster is getting palpably close and the eurozone appears to be on the verge of a major political transformation. The two are not mutually exclusive.

Still the whole remains hideously complicated. What exactly is going on? I thought I’d highlight three long articles which, though not the most recent, explain the stakes (all worth reading in full).

Economics editor of Bloomberg/Businessweek Peter Coy analyzes the eurozone’s state and searches for the roots of German policy. Basically, according to Coy, the Lady is not for turning. Merkel will not yield on eurobonds or the ECB, though current German policy is “fighting against more than a century of central banking theory and practice,” and her proposed reforms neither address the current crisis nor will take effect soon enough.

In addition, it’s not clear that Merkel has either a strategy or a clear conception of the crisis. “If Merkel were thinking strategically, she probably wouldn’t risk the European economy falling into a recession,” he says. Conclusion: “The paradox at the heart of the crisis in Europe is that Merkel’s fetish for stability has become deeply destabilizing.”

Veteran financial reporter for EUobserver Leigh Phillips has let loose in a massive 4,500-word op-ed (really an essay) mapping out how the eurozone crisis has eroded European democracy. Here too there is little to celebrate: Brussels is about to take control of national budgets from elected parliaments and, where no majority for austerity exists, governments of non-neutral Brussels-Frankfurt men of confidence are imposed (“Keynesian experts need not apply.”).

Favorite quote: “At the birth of the United States, the more egalitarian Thomas Jefferson, believed in equality of political opportunity (admittedly only to white males) and favoured ‘plain folk’ and the ‘yeoman farmer’ over the ‘cesspools of corruption’ inhabited by financiers, bankers and industrialists.” The latter presumably referring today to the unelected eurocrats-cum-Goldman Sachs alumni now running Greece, Italy and the ECB.

Finally Ezra Klein over at Wonkblog provides lots of graphs describing near every aspect of the crisis, including sovereign bond spreads, bank exposure, industrial trends and scenarios for crisis resolution/eurozone breakup. Because we’re visual animals, you know? (Incidentally, Wonkblog looks like it has the most comprehensive coverage of the crisis in general.)

All in all, pessimism still seems warranted. Berlin looks to not be ready to do what it takes to save the economy but Brussels does look set to rob us of much of our democracy. Perhaps the summit will surprise us, but as it stands, it seems we are set for more costly, compromising eurocratic halfassedness. Hélas !

Newspeak, the €142 billion budget and the EU’s “communication problem”

The European Union has a “communication problem”. This is allegedly caused by things like the fractured nature of European public opinion, the dull work of Brussels or maliciously sensationalist journalism. No doubt these are often the problem, but I would add another factor: Intentional obfuscation by European institutions.

Case in point, there is little more fundamental to any organization than its budget. Given that the EU is meant to serve and is paid for by the public, one would think it would make some effort to give an account to the layman taxpayer of its spending. Not so. If someone outside the Brussels bubble types “EU budget” into Google he arrives here at the Commission’s webpage describing said budget.

So far, so splendid. But what information has the Commission deemed useful to share with our unsuspecting citizen-taxpayer? This hideously uninformative pie-chart:

In the real world, over 40% of the EU’s budget goes to the Common Agricultural Policy (farm subsidies), another third for Regional Policy (infrastructure and other projects in poorer regions) and the rest on the negligibles.

But no. Instead of basic facts, the Commission presents nearly half the budget as going to “Cohesion & competitiveness for growth and employment”. What in the devil is that and who could be expected to be against any of those words? I, covering the EU every day, am not able to tell what real part of the budget that title is hiding.

“The EU as a global player” is a somewhat more acceptable euphemism, presumably because “foreign policy” is verboten due to the Brits. A shame though as I imagine nice things like humanitarian and development aid fall under this.

The citizen walks away with this only intelligibly visual piece of information having learnt that the EU budget is divided as follows:

• 1/2 for buzzwords
• 1/3 for “direct aids and market-related expenditure” (???)
• 1/10 for the countryside
• 6% for bureaucrats
• 6% for strutting about the world stage

Fantastic. Now, you might protest that a pie-chart is an attempt at simplification and vulgarization. Obviously it fail on both counts, but even those will to dig through some number will be disappointed. The Commission presents this detailed table of the budget:

Note that many of the headings have changed but “farm policy” and “regional policy”are still nowhere to be found. None of the big budget items have actually descriptive headings, instead we have “competitiveness for growth and employment”, “cohesion for growth and employment” and other Orwellian nothings. Thus, our citizen-taxpayer will leave the website still knowing nothing as to how much Europe is spending in his name on agriculture, nuclear power or what have you.

Speaking of Orwell:

Newspeak was designed not to extend but to diminish the range of thought, and this purpose was indirectly assisted by cutting the choice of words down to a minimum.

One difference is that, in EU-speak, the range of thought is reduced and all made wholesome by definition through verbosity rather than virtuous concision.

P.S.: This post was prompted by similar headings used even in leaked internal Commission documents detailing a draft €80 billion to be spent on the “Horizon 2020” research budget.

P.P.S.: The EU can produce an intelligible brochure on the budget. I don’t know why good communication is reserved for .pdfs and glossy pamphlets rather than the top Google ranking page.

ECB (finally) gets bashed in Spanish elections

The EU typically plays a minor role in Spanish electoral campaigns. However, El País reports that “the crisis has also upset this, and for the first time since the 80s, the Spanish campaign has begun with a clash between the two primary candidates on the way the European Union is tackling the crisis.”

Indeed, the ruling Socialist Party’s spokesperson and prime ministerial candidate Alfredo Pérez Rubalcaba is criticizing the role of the independent European Central Bank:

The European economy is immobile. Austerity alone is no good for exiting the crisis. […] We are missing the policies for growth to create jobs. And we have to tell the ECB that Europe’s problem is not inflation, but that there are many people who don’t have work. We have to lower interest rates.

I’m continuously stunned that parties both left and right have taken so long to make an issue of this. In a “suboptimal” currency union, it is impossible to have a monetary policy that suits everyone. However, you would expect those getting the short end of that stick to make a little fuss about it, especially when the policies are so narrowly-conceived that one financial analyst goes so far as to accuse the ECB of catering to “the Rhineland zone”.

The case of Spain is particularly striking. The unemployment rate continues to increase and has reached a Depressionesque 21.52%. The country cannot be said to be getting its comeuppance for not “playing by the rules”. Spanish public debt decreased from 67.4% of GDP in 1996 to 36.2% in 2007, meaning it followed the rules of the Stability and Growth Pact better than either France or Germany.

From Spain’s point of view, as the country tries to lower unemployment and return to growth, the policies of the ECB could hardly be more devastating:

1. A focus on fighting headline inflation, using a baseline interest rate of 1.5% for loans (the equivalent figure is 0% for the Fed and Bank of Japan), increasing it twice through 2011, and thus limiting investment.
2. As the rest of the world engages in competitive devaluation and “currency wars” to boost their exports, the ECB is pursuing an “ultra-hard” monetary policy. The euro currently trades for $1.41 or £0.88.
3. A refusal to commit to being a lender of last resort, feeding financial speculation against national debts and forcing governments to get high-interest loans on the financial markets.
4. Advocating more budget cuts and “expansionary-austerity”.

Why isn’t the Spanish political class (scratch that, the politicians of the whole of Southern Europe) up in arms about this? I suspect Europe’s leaders don’t want to get into public tiffs over the ECB and monetary policy in general is too abstract to inspire the public’s ire.

The ECB’s independence and the fact that the Socialist Party is already in power in Spain (and will probably lose in November) means whatever Rubalcaba says will probably be a little immediate import. However, if other campaigning leaders begin to make an issue of this – at a time when a new ECB president has taken office and the centre-left appears likely to make major gains in France, Germany and Italy – we may have the beginnings of a public debate on Europe’s monetary policy and the statutes of the ECB.

Right-wing U.S. Pundit Distorts My News Article to Fit Own Ideology

Classic of the ultra-capitalist ideology (1957), already featuring collapsing/impoverished Europe.

OK, that isn’t exactly newsworthy is it? However, in this case, it is some of my news which is concerned so I think it worth a response.

Meet Daniel Mitchell, whom Wikipedia describes as a libertarian economist (…), senior fellow at the Cato Institute and “one of the nation’s experts on the flat tax”. In a post on Forbes.com (syndicated on Andrew Breitbart’s Big Government) He cites my story on a survey revealing discontent among the European Commission’s functionaries as proof – surprise! – that “Statism” doesn’t work.

The quote:

And since we’re contemplating the big-picture issue of whether markets are better than statism, here’s some very sobering polling data from EurActiv. […] This is remarkable. Even the statist über-bureaucrats of the European Commission realize the house of cards of big government is collapsing, yet politicians in Washington still want to make America more like Europe.

This response isn’t particularly surprising, even if these “statist über-bureaucrats” actually have infinitely less power and authority than the U.S. federal government.

What I termed the “American ultra-capitalist ideology” is predicated on the fact that the welfare state, regulation and indeed all “government intervention” (really non-pro-Big Business intervention) is bad for the economy. As such, any and all really existing successful welfare states/mixed economies – and notably European ones – are an objective threat to the ideology and therefore must be discredited and indeed have their very existence denied.

To save the ideology, successful alternative models must be demonized by right-wing pundits, media and politicians. It is then very dangerous for the ideologue that the World Economic Forum – the ultimate preacher for capitalist globalization – recognizes countries like Germany, Finland, Denmark and Canada as among the top 10 most economically competitive countries in the world.

Sweden – though famously welfarist, egalitarian , and with some of highest state expenditure, the country has some of the lowest government debt in the world and the WEF deems it the second most competitive – is naturally a favorite target, as is France, in addition to Europe more generally, even for supposed wise men.

As to Daniel Mitchell, no one should be intimidated by his apparent academic credentials. I respond with facts, as subversive as they may be:

1. In “Statist Europe” the budgetary situation is rather more sustainable than in America. EU27 public deficits average at 6.4% of GDP (6% for the Eurozone) vs. 11.5% in the U.S. As stated previously, I have no faith the American political class will rise up to the challenge of squaring the circle by either significantly cutting welfare for seniors (Medicare, Social Security), raising taxes, or reducing military expenditure. The U.S.’s medium-term budgetary outlook looks pretty bad indeed.
2. The E.U.’s relative fiscal conservatism is part of the reason the U.S. dollar’s value has collapsed to 0.7 euros.
3. If Eurocrats don’t believe specifically in the “2020 Strategy for Growth” it is because it is yet another one of the European Commission’s budgetless lowest-common-denominator slogans being passed off as policy. It means damn well near nothing just as the Lisbon Strategy (you don’t remember that?) meant nothing. However, it’s depressing for the Eurocrat, as his livelihood depends on his pretending this means something.
4. The main differences between E.U. and U.S. economic growth (currently 1.8% vs. 2.8%) are chiefly due to demographic growth, the U.S. having significantly more babies and immigrants, leading to just shy of 1% point more demographic growth. Productivity is comparable

I have no illusions that these facts would be able to penetrate into the consciousness of someone who writes for Cato or Big Government. More likely, as with any soldier in the army of professional ideologues that have taken over American politics, they would be immediately and ably eliminated by his various psycho-ideological defense mechanisms. Any new reality, I am sure, can be twisted to fix his pre-existing “big-picture”.

Just for fun however, I emailed these facts to Mitchell. He replied:

I have no idea where you’re getting your public debt numbers. The Economist website shows the US lower (not that the US is good).

I share your disdain for US politicians, but Europe is falling off the cliff first. Western politicians have taxed and spent themselves into the gutter.

I realize Eurocrats want more integration, but that would be repeating a mistake made in America – and hasten Europe’s collapse.

I replied in turn that I got my figures from the IMF, Eurostat and the U.S. Government Accountability Office (GAO). No response.

So, as expected, I failed to convert the true believer from his faith. However, I think most people are reasonable, and I hope this post will help them understand a little better both my article and the real state of things on both sides of the Atlantic.

In Defense of Decadent Europe: Is it “the best place on Earth to be born”?

A beaming Donald Tusk holds the European flag with Hungarian Prime Minister Viktor Orbán.

“The European Union is great. It is the best place on Earth to be born and to live your life.” – Prime Minister of Poland Donald Tusk, 1 July 2011

For those of us involved in European affairs, it has been more than a little refreshing to hear Donald Tusk, whose country now hold the EU’s six-month rotating presidency, going against the overwhelming ambient pessimism of the continent and especially of its media and elites.

Of course, Tusk’s words might be deemed hyperbole (I hear Canada and Australia are nice) and, for some of us, downright offensive. How many us could go to the youth of Spain who face 40% unemployment or of Greece as their country’s economy collapses – and tell them they’ve got it the best in the world?

On the other hand, like inveterate EU blogger J. Clive-Matthews I really do think there is a lot of truth to what Tusk is saying. Let me even go out on a limb: Even in a recession and with some countries in deep trouble, Europe on the whole really is the best-off place in the world.

“Nay!”, I hear you say, “It can’t be!” Surely we Europeans are lazy, infertile and soft. In a word, we are decadent.

In recent years there has never been a lack of prophets, both foreign and domestic, predicting the doom of decadent Europe: Infertile “native” Europeans will be displaced by Muslim immigrants and their descendents, virile Americans and their soldiery are the only things keeping ungrateful Europeans safe or, most common nowadays, the Chinese will economically devour us.

Of course, each of these allegations has their truthiness. They can resonate with our lived day-to-day reality of poor race relations and today’s bad economic times to broader angst at living in postmodern civilization.

However, having consulted the facts, not just the feeling in our guts, let me go on the record: I don’t believe one bit of it. The citizens of the European Union, as a whole, have some of the healthiest, wealthiest, most peaceful and productive lives of the whole of humanity.

In this, we are up there with the rest of what we used to call the “First World”, along with North America and Japan, later joined by a few small East Asian countries (notably Hong Kong, Singapore, South Korea and Taiwan). I would go on to say, however, that not only are the Europeans among this enviable class of nations, but we are, in fact, decidedly less “decadent” than some of our peers. Let me say why.

Demographics

First, on the population issue, Europe is not isolated in having fewer children. The United Nations has been following this for years and notes that between 1965 and 2002 the world average fertility rate per couple collapsed from 5 to 2.7.

European nations tend have few children – the EU average is 1.6 per couple – but this is not unusual for developed countries nor the lowest in the world. No, the bottom six on that mark are all highly-developed East Asian countries with fertility rates ranging from a high of 1.23 for South Korea down to an amazingly low 0.92 (less than 1 per woman) for Macau, with Japan, Taiwan, Singapore and Hong King between those two.

In the 70s and 80s, hysterical fear of the Japanese “economic threat” was par for the course in the West. No one seems to remember those days anymore as Japan and the “Asian Tigers” – armed with Lee Kuan Yew’s infamous “Asian values” – have overtaken the West in the transition to becoming wealthy and peaceful fortified retirement homes.

Yet, inexplicably, the West is repeating the same mistake with China. Yes, it is the most populous nation in the world, yes its economy is growing at an astonishing rate and, yes, the country is undoubtedly destined to be one of the leading economic powers of the 21^st Century.

But I suspect we make too much of this. The Chinese fertility rate is already lower than Europe’s at 1.54 and the UN predicts its population will begin shrinking between 2025 and 2030. Then, though still substantially poorer than Europe, the country will have to struggle with our same intractable problems of maintaining an ever-growing number of pensioners with a shrinking base of productive working-age people.

What of the supposed hordes of Muslims that will be displacing us and turning our fair continent in “Eurabia”? International demographers and statisticians tell us the sharpest drop in fertility in the entire world between 1980 and 2010 was in… the Middle East. The leaders in this trend are the Iranians, no less, whom the CIA already report have less than 2 children per couple.

Economics

Public debt-to-GDP according to IMF figures.

Europe’s alleged economic decadence is an equally common trope: laissez faire capitalism is always better, State intervention always inefficient, and the welfare state is certainly making Europeans spoilt and lazy.

Here American ultra-capitalist ideology plays a heavy role and one can cite the usual wiseman-dunces like Fareed Zakaria (who on this basis declared “the decline and fall of Europe” in 2006). The Economist continues to be a big fan of this trope, generally singling out France, but still being a rather reality-tethered publication it occasionally recognizes success when it is there.

The truth is the gap in productivity growth between the USA and Europe collapsed in the early 2000s. Since then, Europe has done substantially better through the economic crisis. Unemployment in Europe and America has been almost identical, on average peaking around 10%, then going down to a current EU average of 9.3% while in the US it is at 9.2% (and actually rising). Note that the unemployed European typically has a rather more secure social safety net than his American counterpart.

The real difference is the budgetary situation. The regional disparities in Europe and the crises in the PIGS obfuscate a broader reality: EU deficits are substantially smaller than America’s: the Euro zone’s average deficit lies at 6%, the broader EU’s at 6.4%, and the average government debt stands at 80% of GDP. The United States, with a significantly weaker welfare state than other Western countries, in contrast has a public debt of 99.5% of GDP and deficit equal to 11% of GDP (over $1.4 trillion).

Indeed, given the political impossibility of cutting old persons’ welfare in the US (Medicare and Social Security, by far the biggest items in the Federal budget and set to grow massively), the Republican congressional majority’s total rejection of tax hikes, and continued increases in military spending ($18 billion more for the Pentagon in 2011), one can be distinctly pessimistic on the US’s medium-term budgetary situation. The IMF, incidentally, predicts US debt will increase substantially more than European debt in the coming years.

No one has an interest in the US economy collapsing so America’s foreign creditors are unlikely to be as brutal as those of Greece or Ireland. Nonetheless, there should come a time when the Chinese and others will decide it is not in their best interest to keep throwing money at the US government…

Of course, Europe’s economy doesn’t have the spectacular growth of the emerging world. However, the situation of most Europeans, even with the economic crisis, cannot be compared with the vast majority of people who live in the developing world. And it should not forgotten, as we fret about China, India et al, that their tremendous economic growth is not a sign of their superiority or our decadence, but of their catching up. That other countries reach our standards of living should be cause of celebration, not fear or self-doubt.

The State of the Union

There is the European Union itself, that simultaneously bizarre, incomprehensible and inspiring entity that is going through some difficulties at the moment. As imperfect and troubled as it is, it remains one of the world’s unique and truly great historic achievements.

The EU is not perfect but I really think our pessimism is overdone. And I feel we are ungrateful for what we have. People are willing to die every month to get into Europe. Whole countries are doing all they can to share in our success: Serbia arrested its most infamous war criminal to please Brussels, Ukraine wants a Free Trade Agreement with the EU rather than a customs union with Russia, Turkey may be turning away but only after 70 years of consistent rebuffs.

True the so-called common foreign policy has been a big fat nothing. But the EU remains a genuine economic actor: the biggest economic bloc in the world, 27 national governments representing 500 million people, with all their varying languages and histories, negotiate as one with others countries and at the WTO. Given that international relations the 21^st Century have been and look to remain dominated by economic matters, who is to say the EU is not a well-suited organization for it?

Certainly it says something when other regions are attempting to repeat this success in economic integration, with much more limited results, in as wide-ranging places as South America, Africa and the post-Soviet sphere.

Too often the assessment of Europe’s successes or failings is based on comparison with the United States. There should be more to EU-US relations than transatlantic pissing matches. However, for this particular article, this cannot be avoided. Our leaders, I think it is fair to say, are deeply infatuated with America and are willing to even wage wars (as boneheaded or illegal as they may be) on its behalf. And yet, I am convinced it is a profoundly sick nation.

A child born in the United States, rather than in any other nation, will be more likely to become overweight or obese (over 40% of adult population in 39 states), will spend more money on healthcare (twice the average for wealthy countries, over 16% of GDP) and will be more likely to go to prison (the world leader both absolutely and per capita with 2.3 million incarcerated). He would also be born in the most needlessly oil-dependent and greenhouse gas-emitting nation in the world. These problems, while they all exist in Europe, have not yet reached the scale of the United States.

“We’re doomed! Unless…”

Given these facts, I have some difficulty understanding European leaders envy of America and the more general pessimistic obsession with European decline. I cannot help thinking of something Sartre once said:

When a Frenchman, for example, tells another Frenchmen: “We’re screwed!” – which, as far as I know, happens about every day since 1930 – it’s a passionate speech, burning with rage and love, the orator putting himself in the same lot as his countrymen. He then generally adds ‘Unless…’ We see it for what it is: There is only one mistake to be made; if his recommendations are not followed to the letter, then and only then will the country disintegrate. In short, it’s a threat followed by a piece of advice.

For so many people, Europe is doomed, unless we keep out those Muslims, unless we dismantle the welfare state and give tax breaks to big business, unless we boost military expenditure and join the United States in yet more forlorn crusades… Forgive me if I don’t always think these are the most generous and disinterested pieces of advice.

And even supposed “good Europeans” engage in this. Federalists habitually claim Europe is doomed if it does not integrate more now. Javier Solana recently asserted that without Turkish membership the EU would become “a museum” rather than a “global player”. This sort of hyperbole is irresponsible and does no service either to the speaker or to the cause they purport to be promoting. And as stunted as integration is now, that is not the same as decline.

So after this long exposé, what more need be said? Europe on the whole is a very fine place to be born: As civilized, peaceful and prosperous as anywhere, including Canada, Japan or Australia, but in addition with an internal cultural diversity and international outlook that is really unique and valuable.

Of course, we should be careful that legitimate patriotic pride not lead to undue chest-thumping and to dreaded nationalism. The pride of any people or country should never depend on the denigrating of others or meaningless cries of “We’re number 1!” On the other hand, I do think we might legitimately paraphrase Churchill: Europe, clearly the worst place to be born in the world, except for all the others…

Daniel Hannan hails Europe’s non-existent swing to the right

Tory MEP and prominent EU blogger Daniel Hannan sends his congratulations to Portugal on electing a centre-right government saying “Where the people of Greece appear to be in denial, rioting whenever spending cuts are suggested, our oldest allies accept that they cannot carry on with the policies”.

He sees it as “part of a wider European flight from the Left. Of the 27 EU member states, only five now have Left-Of-Centre governments.” “Why?,” he rhetorically asks, “Mainly because people see that money has run out. […] Now they simply want competence.”

One would have to not have access to any newspapers or suffer from a particularly bad case of “ideology,” whereby one imposes ones stilted preconceptions on one’s perceptions of reality, with frightening ability in this case. I will simply say that recent developments include:

• The overwhelming victories by the left across Italy and notably in Naples and Berlusconi’s traditional stronghold of Milan.
• The repeated victories of the centre-left in regional elections in Germany, including even greater left-wing domination of Bremen and the right’s losing control of Baden-Württemberg for the first time in six decades, leading to the first Green minister-president.
• The crushing defeat of Nicolas Sarkozy’s UMP at local elections in March, scoring only 20%, 16 points below the opposition Socialists’ 36%.
• Recent polls have Sarkozy to be defeated by a centre-left candidate if elections were held today, almost regardless of who that candidate is.

The current wave of elections is obviously overwhelmingly anti-incumbent, as opposed to inherently left or right, as they often are in times of economic crisis. Given that Europe is currently governed by centre-right parties it means that, despite some gains for the far-right, the centre-left is likely to make more big wins in the immediate future.

Almost all European leaders, I think, feel their crowns are resting very insecurely upon their brows. This can lead to desperate tactics. However, neither Sarkozy’s traditional race-baiting nor his little war in Libya  have really helped him in the polls. And, very encouragingly, Berlusconi’s incredible homophobic, anti-Gypsy and anti-Muslim campaign failed to prevent a crushing defeat in Milan.

Already José Sócrates of Portugal (centre-left) and Brian Cowen of Ireland (centrist) have been dethroned. Instead of gloating too much, Hannan ought to think about what he can do to help his right-wing friends: I expect Europeans will be unceremoniously evicting many more of their leaders regardless of their political stripe!

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