Saturday, 4 February 2012

Is Europe heading for ‘an early grave’?

A new grave, awaiting a client. Europe maybe?
It most certainly may be if one is to believe Kevin Rudd, Australia’s foreign minister. He issued his gloomy warning in a speech to world leaders attending the Munich Security Conference and his words are sure to cause anger and embarrassment in Europe.

Rudd said that Europe was absent from the debate over the growing economic and political influence of China and Asia, adding that “…this should no longer be the case.”

"The danger that I see” he said “is Europe progressively becoming so introspective and so preoccupied with its internal problems on the economy and on the eurozone in particular that Europe runs the risk of talking itself into an early economic and therefore globally political grave".

"We don't want that. We actually think Europe has fundamental strengths to deliver to the rest of the world but we are not seeing a whole lot of that right now.”

Depressing stuff indeed. But is he right? 

It must be said that it’s not as if his speech – headline-grabbing as it was - breaks any new ground. Analysts and government think-tanks have for years been churning out study results which demonstrate the inevitable decline of Europe in relative terms because of the shift in the balance of the world’s economic power centres.

But another, and more ominously pertinent, clue as to the veracity of Rudd’s words in today’s context is to be found in the reaction to them by EU internal market commissioner Michel Barnier, who curtly claimed that Europe would “emerge stronger and better organised from this crisis.”

Barnier’s answer is almost as depressing as Rudd’s predictions. There are no reasons whatsoever to believe that Europe will come out of this crisis strengthened. On the contrary, the Greece bondholder discussions are dragging themselves out and last Monday’s EU summit failed to make any progress on the EU bailout fund. In other words, the measures decided during the December summit to address the eurozone crisis – measures which were derided by many analysts as being too little too late and which led to Cameron washing Britain’s hands of the whole affair – are still waiting to be implemented.

Europe seems to be in a state of denial over the risks that it is running, and nowhere is that to be seen more clearly than in the French press, which deliberately downplayed all the rumours of an agency downgrade of France and is still publishing upbeat articles on the Franco-German tandem and its rosy future in the future of Europe.

It’s as if they just don’t want to acknowledge the looming possibility of the demise of the euro, and even that of Europe itself. But the facts are there. Further downgrades are being predicted, various countries are known to be reassessing their currency printing capacity in case the euro collapses and national currencies are introduced, and meanwhile the American economy is showing strong signs of recovery, against all expectations. 

So, is Rudd right? Or, put another way, ‘can Europe prove him wrong?’ Michel Barnier most certainly did not prove him wrong today, and unless Europe stops fiddling around and decides to grab the debt bull by the horns, and quickly, his predictions will become a reality as Europe slides irrevocably into an early grave.

No comments:

Post a Comment