Herbert London: European Future on The Ropes
Based on the accumulation of recent reports, Europe is among the “walking dead.” The recent elections in Greece and France indicate that the respective populations are resistant to austerity measures. Despite insolvency, or in France’s case the prospect of insolvency, Europeans are so committed to their entitlements, they won’t give them up. Claims that a higher millionaire tax will offset the deficit provides a frission for socialists, but does little to offset the financial imbalance.
A European Union initially designed to constrain German ambitions, now exists to do Germany’s bidding. Chancellor Merkel represents the only European nation that can pay its own bills and help out other Union members. But ultimately this is a precarious position for German leaders who are continually confronted by businessmen who ask: “why should we pick up the tab for a Greek bus driver who wants to retire at 55 or pay to underwrite the pension for a municipal employee in Palermo?”
The answers are not apparent, but the heat generated by these queries is at the very center of Germany’s political debates. Moreover, the financial instability in the Union had led to political extremism. The rise of new socialist parties and fascist organizations across the continent is cause for concern. During Monsieur Hollande campaign there were unfortunate manifestations of anti-Semitism with calls to control the Jews who dominate the financial system.
If the Europeans cannot tolerate austerity measures and do not have the wherewithal for innovation and the condition for genuine economic growth, the continent will soon become moribund. Even the euro will be perceived as an enemy of national fiscal policy.
Eying the European malaise are sovereign funds that can engage in “bottom feeding.” The Chinese have already made major investments in Portugal and Italy and have been surveying the collapsing economic environment.
Complicating this economic tragedy in the making is the inability to integrate Muslims into the larger economic community while they simultaneously absorb a disproportionate share of welfare assistance. Although the evidence on this matter is not yet clear, it seems that the Muslim vote in France accounted for Hollande’s electoral success. How then do you engage in austerity measures if the group most likely to be affected is a subset of the population that got you elected in the first place?
Notwithstanding arguments to the contrary, it seems that the disease affecting Europe may cross the Atlantic. U.S. banks have been inextricably tied to their European counterparts and these European entities are facing unprecedented cash shortfalls. With the U.S. economy on its heels, it is not in a position to bailout Europe’s banking industry.
It is obviously time for Europeans to face reality. The era of cradle to grave entitlement is over. If the public insists on public funding that the economy cannot sustain, the continent’s asset base will sink into the Mediterranean or perhaps become an extension of Asian enterprise. Europe is a grand museum, but the engine that generated wealth is antiquated and on its last legs.
As the European hold on to outmoded socialist ideas, they foster their own demise. Alexis de Tocqueville once noted that “Democracy and socialism have nothing in common, but one word: equality. But mark the difference: while democracy seeks equality in liberty, socialism seeks equality in… servitude.”
For many Europeans servitude is just over the horizon – either servicing the Germans who maintain control through their economic success or the Chinese who buy European assets at a fraction of their actual value. The choices are not easy and the recent elections indicate some Europeans prefer to avoid hard choices. But like it or not, history will not disappear and economic reality rears its head each and every day.
Wake up Europe, your fate is about to be determined.
Herbert London is president emeritus of Hudson Institute and author of the new book The Transformational Decade (University Press of America).
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