By Oliver Green
Right from its very beginnings, the modern concept of 20th Century European unity was born out of the shear Geo-strategic challenges of early post-war Europe. In 1948 the Treaty of Brussels was signed on 17th March by Britain, France, Belgium, the Netherlands and Luxembourg, stressing the need for the mutual defence of Western Europe to maintain peace and deter German tanks from rolling over the French boarder, with the memory of 1940 still current and at the forefront of strategic policy thinking. Yet NATO was soon to be formed the following year, which would provide all of Western Europe’s defence needs at a stroke and with the full backing and commitment of the United States. However, the origins of the attempted federal super-state of the European Union began with the Treaty of Rome being signed on 25th March 1957 and coming into force on 1st January 1958, establishing the European Economic Community or EEC, establishing a Customs Union with no internal tariffs between its member states and with a common external tariff to the rest of the world, which would meant that no member of the EEC could make any separate unilateral trade deals with any other nation, as only the EEC as a whole could do so with any other country outside of the bloc. The founding members of the EEC included France, West Germany, Belgium, Holland and Luxembourg, with Britain finally joining in 1973, and after a referendum on membership agreed to remain in 1975.
However, at this point it was still very much a free trade area, which exclusively centred on the economic interests of the wealthy nations of Western Europe that were now beginning to thrive from the benefit of post war reconstruction and as recipients of the Marshall Plan, otherwise referred to as The European Recovery Plan or (ERP). The real turning point began with the signing and introduction of the Single European Act or (SEA) from 1986-1987. SEA began the process of turning the EEC into a fully-fledged political union to be imposed upon the unsuspecting peoples of Europe. SEA set out the aim of creating a full European Single Market no later than 31st December 1992, which was done and then officially introduced on 1st January 1993 leading to the Maastricht Treaty, otherwise referred to as the Treaty on the European Union or TEU), which was signed on 7th February 1992 and came into force on 1st November 1993, creating the European Union and authorising the creation of the European Single Currency, (making 1993 the year when the EEC ceased to be a mere free trade area and instead becoming a political union and aspiring supranational super-state, imposing the free movement of Capital, Goods, Services and People on all member states throughout the continent) latterly being officially named as the Euro on 16th December 1995, being introduced on 1st January 1999 as an accounting currency and entering circulation on 1st January 2002 among the 19 of the now 28 member states of the EU and is the biggest fundamental reason why the EU as a whole is on borrowed time and will not withstand the long established trend of history where unaccountable, heavily bureaucratic and centralised institutions and political blocs are concerned. History has long and consistently favoured the less regulated, de-centralised, pluralistic, competitive, pragmatic and dynamic political and economic powers, both in terms of their prosperity and lasting significance.
By 221BC the warring kingdoms of China had been united by force. Yet, far from achieving global dominance, the successively harsh, heavily centralised and bureaucratic empires of ancient China were beset by civil wars, rebellions, fragmentation and numerous invasions in the north. Consequently by around 1450-1500, China had become economically and later militarily dominated by the European powers, mainly and latterly by Britain. In addition, it was the very disunity of Europe that had encouraged the very competition and innovation that made the European powers and Britain in particular great world powers, whilst heavy centralisation, excessive bureaucracy and lack of inward competition has made China lag behind the west for the last 500 years, with it only now playing catch-up by imitating us and producing products that we want cheaper than we can produce them. The same fundamentals applying to the contrasting fortunes of the settlements of North and South America, with the Spanish and Portuguese Empires and subsequent states in the south being top down authoritarian regimes based on plunder, whilst the Anglo colonisation of the North was based on freedom, property rights and the rule law, with the latter going from strength to strength and resulting in the unassailable Superpower of the modern world, while those of the South have remained relatively poor, with their strategic and Geo-political influence remaining confined to their own shores, allowing western civilisation to dominate the world for the past 500 years, despite only containing a fraction of the world’s population.
It’s no coincidence that the rise and proliferation of popular anti-EU political movements across Europe is an exact mirror of the last geo-political and economic shift that took place in the 1980’s to early 90’s, which culminated in the total dissolution of the Soviet Union. The only question that remains in my mind is how long it will take for the European Union to go the same way. Furthermore, when Angela Merkel has implied in the past that voters can be won back to the European project through high job creation, improved economic competitiveness and growth, she’s missing the point a bit, as the EU has already shown itself to be just as incapable of delivering on any of these things as the former Soviet Union. Especially given the fact of Merkel watering down the very austerity measures and economic policies in Germany that she’d been preaching to the rest of Eurozone, so as to appease the Socialists at the time of her newly formed Grand Coalition Government.
Despite repeated terrorist attacks, Brexit and Donald Trump’s historic US election victory, Merkel and most of the EU’s political establishment remain as doggedly committed to open boarders, free movement of people and the embrace of mass immigration from outside the bloc as ever, as well as seeking greater and greater increases in the powers they have to make decisions concerning the domestic and foreign policy directions of member states. In short, the EU political establishment remain in complete denial and have learnt nothing from the re-assertion of nationalism, self-determination and popular feeling on both sides of the Atlantic. They instead choose to blame the internal political maneuverings and alleged ignorance of voters in the member states concerned, and blame Eurosceptic political figures of all stripes of holding the views they have out of alleged ignorance of what “Europe” is all about. The EU Commission President Jean-Claude Juncker stated during Britain’s EU Referendum campaign of how Brexit Campaigner Boris Johnson needed to come on an “educational visit to Brussels” to bring his views in line with “reality” and his now saying the same of the American President, who unlike him has actually been democratically elected.
The fundamental medium-term cause of the EU’s demise
But the Euro is the fundamental factor of the medium term in causing widespread disaffection and antipathy towards the EU throughout Europe, and is crucial in bringing the demise of EU to a head. Firstly, the Single Currency has done nothing to advance the harmony and prosperity of Europe as envisioned by those who conceived it. The only member state to benefit from membership of this Currency Union is Germany. Since the Euro’s introduction, Germany has been a key benefactor of China’s Economic boom of sustained double-digit growth and continues to be despite China’s relative slowdown to single digits. This is hardly surprising given Germany’s industrial and technological edge over the rest of the Eurozone. Moreover, Germany is by far the senior partner in the Franco-German alliance, which the European Union is ultimately centred on and supported by, both in terms of Germany’s economic weight (as the world’s fourth largest economy) and in the lion share of transfers it makes to support the Euro area, especially when bailing out flagging debtor states like Greece, where Germany has funded 60% of loans from the Eurozone, hence why the German’s are at the heart of the whole enterprise and making the rules, as those who pull the purse strings make the rules. In fact in 2007, Germany contributed more into the EU budget than the 19 lowest-paying member states combined.
Furthermore, because of Germany, EU-China trade has increased dramatically in recent years. Germany is by far China’s biggest trading partner and technology exporter in Europe, and the amount of German investment in China ranks second among European countries, after the United Kingdom (which also has a competitive edge given the relative size of its economy coupled with it not being in the currency union), whilst China also continues to be Germany’s second largest trading partner outside of the European Union, after the United States. As result, trade volume in US$ Dollar terms between China and Germany passed the 100 billion mark in 2008. By 2014, Angela Merkel had visited China a total of seven times since taking office in 2005 to preserve this trading relationship, which is made possible in large measure by Germany’s membership of the Currency Union. As members of the Euro, the Germans are able to maintain the relative weakness required of their currency to keep their exports competitive enough to preserve the healthy trade surplus that they have, which in 2016 still ran at a staggering monthly average of 21,093.107.17 Million Euros. Consequently, China is nominally the EU’s biggest source of imports by far, and has also become one of the EU’s fastest growing export markets. The EU has also become China’s biggest source of imports leading to China and Europe now trading well over 1 Billion Euros a day.
However, in practice it is Germany which is predominantly responsible for this and receives the vast bulk of the dividend, having enjoyed an average of 1.3% annual GDP growth from 2004-2014, preserving its standing as the world’s fourth largest economy, (fluctuating at around three and a half trillion dollars) and which the rest of the Eurozone (primarily in the south, but France as well) pays for in terms of lost competitiveness, recessions or very sluggish or minimal economic growth, mass unemployment and poverty, as Germany’s dividend is only made possible by their monetary union with the much smaller and less competitive Eurozone members in southern Europe, which provide the necessary downward pressure on the Euro to keep German exports competitive. The annual GDP growth for France in the same period averaged at a mere 0.9%, while Spain was 0.6%, whilst others in the Eurozone experienced recessions as a regular norm like Portugal averaging at -0.3%, Italy at -0.5% and Greece not surprisingly being the worst at -2.0%.
The reason for this disparity being that the Single Currency acts as a straight-jacket on the economies of the other Eurozone members of primarily southern Europe and France, as they can no longer set the individual interest rates for themselves to suit their own needs, or devalue their currencies to export and inflate their way out of debt, or respond flexibly and accordingly to unforeseen events such as the 2008 financial crisis. The result has been an acute loss of competitiveness for them, along with record breaking levels of unemployment resulting in falling tax revenues, further adding to the numerous pre-existing deficiencies in their economies, such as high tax evasion, poor productivity and deep structural flaws in areas like job killing employment laws and excessive welfare entitlements, all of which exasperate their predicaments further, resulting in spiralling levels of government debt and soaring borrowing costs as they are inevitably downgraded by ratings agencies, with the worst affected and least able to pay mounting debt levels far in excess of their capacities and market confidence to repay. In 2015, Portuguese government debt amounted to 148% of the country’s GDP, surpassed by Italy’s of 160.7% and Greece not surprisingly the highest at nearly double the amount of its entire economy at a 190% debt to GDP ratio. Consequently, Eurozone states such as these have accompanying soaring levels of unemployment, such as France with 9.9% unemployment in 2015, while Italy and Portugal experienced 12.1%, Spain 22.4% and Greece 24.9%. Youth unemployment was also staggering in member states like Italy with a 42% unemployment rate, surpassed by Spain and Greece at around 49%.
Hence, the unsustainable Single Currency is by far the biggest medium-term factor sealing the EU’s fate by the unravelling of the Euro, as justifiably angry voters throughout Europe are spurred on by Brexit and Donald Trump’s election triumph, venting their anger into support for anti-EU movements until one by one, members of this highly dysfunctional currency union could potentially end up with governments being elected to extricate themselves from the Currency Union. Only the dismantlement of the Currency Union in particular will enable these member states to regain the Sovereignty they require, so as to regain the monetary and fiscal policy tools needed to inflate and grow their economies out of turmoil and back to prosperity. In addition, rock bottom interests have also added a further catalyst to people’s disaffection, as right across the Western World, record low interests have served to inflate the asset prices and wealth of the rich at the expense of everyone else, further widening income inequality, then add the migrant crisis putting further downward pressure on wages and services, coupled with repeated terrorist attacks on innocent members of the public with no end in sight and you have the perfect storm.
The fundamental and underlying long-term cause of the EU’s demise
However, the dysfunctional and failing Currency Union alone is not enough in and of itself to explain the deeper and long-term underlying cause of the EU’s ultimate demise. The fundamental long-term cause of the European Union’s demise has no direct basis in economics at all but is instead political, with the best evidence of this being Britain. Thanks in large part to the efforts of one of our former Chancellors; Norman Lamont, Britain was kept out of the Euro when Maastricht was signed in 1992 and as a result we have remained economically sovereign by European standards, yet former Prime Minister David Cameron was still left with no political choice but to hold and in-out referendum on EU membership. In addition, disaffection of voters in America propelled Donald Trump to the White House, and the Americans aren’t even in the EU, as the form which globalisation has taken has caused widespread disaffection and anger all over the Western World.
Much of the political class, EU establishment and regarded “experts” very eloquently describe some of the symptoms which they can identify with the worldview that they have, as well as also grasping one of the major symptoms of the failings of their particular form of globalisation. However, they are still in denial and still do not grasp how limited their worldview is, often dismissing the recent political realignments as being the results of simple misguided populism, born out of the politics of envy. Furthermore, what they all overlook most of all is the significance of the historical cycle, which I’ve explained in my Trump article, when I draw parallels with disaffection toward and the final fall of the Soviet Empire in the 1980’s (not the rise of Fascism in the 1930’s), and how it is now playing out again with the equally dysfunctional western institutions of today, which have become divorced and at odds with representative and accountable democracy! This is the true historical parallel which they are blind to and bears no relation whatsoever with the rise of Fascism, but quite the reverse.
In addition, most of them also appear to be way off the mark by viewing this shift as a rejection of globalisation, again a complete misconception. Britain is leaving the EU to re-join the world and trade globally again as the world power that it has always been destined to be. It is not globalisation that’s on trial here, but rather the form it should be taking. One way in which both Brexit and a revised American trade policy are now addressing this is by moving toward a global economic order of bilateral trade deals between countries, along with a rejection of the dysfunctional and anti-democratic political and corporate global orders, which serve their own internal interests, such as the EU and the attempted intercontinental trade deals like TTIP and TPP, which would serve the interests of big business and in some cases allow them to take governments to court. The course globalisation should now be taking is one of individual nation states trading bilaterally with one another under the full and direct scrutiny and control of their directly elected and accountable governments, which should be better placed to ensure that the benefits of an inevitably shrinking and globalised world are more evenly and representatively realised.
The European Federalists and EU establishment also fail to grasp the long-term historical, political and cultural factors and value systems essential in the establishment and building of great nations, especially the more exceptional ones which are able to successfully project their power globally. It took centuries for Britain to emerge from a collection of competing tribes into a world power, and for a reasonably representative parliamentary democracy and legal system to develop. The United States was born out of a set of beliefs and common destiny for its people. A successful nation can only endure and thrive when it expresses and is founded upon the common interests, sense of belonging and consent of its people. Whereas, the EU is totally incapable of representing or delivering on any of this, and despite what those in charge of it might think, the European Union stands for none of what I’ve just mentioned, but is a mere bureaucracy representing nothing more than the rules and regulations as presided over by a select group of unelected and unaccountable bureaucrats with the sole purgative to propose and amend legislation.
Hence the European Union does not represent the best interests of the people, does not reflect what Europe is supposed to be about and can be justifiably viewed (rightly or wrongly) as a cartel for big business. Consequently, it is inherently unsustainable and divisive and is not going to survive the unanimous verdict of long established historical trends, sooner or later passing into history, joining the likes of the Soviet Union and many others as it does so, either abruptly, or perhaps more likely through a gradual process of sidelining, superseding and irrelevance!
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