By Adriano Bosoni
Europe is overcrowded with people and with nations. Six decades ago,
the need to suppress the dangerous forces of nationalism led to the
unprecedented political, economic and social experiment now known as the
European Union. The hundreds of thousands of EU citizens working across
the Continent and the lack of border controls between member states
show that the experiment has been successful in many ways. However,
rising nationalism, pervasively high unemployment and a growing sense of
frustration with governing elites also highlight the serious
limitations of the European project. Over the past 12 months, I have
traveled extensively throughout Europe, observing firsthand how the
global economic crisis is reawakening dormant trends along the
Continent's traditional fault lines.
The crisis is having an uneven effect on EU member states because the
eurozone locks countries with different levels of economic development
into the same currency union. Europe's geography helps explain these
differences: Countries in the south have traditionally dealt with high
capital costs and low capital-generation capacity, while countries in
the north have seen the opposite.
In December, I drove from Barcelona to Madrid. The endless succession
of mountains along the route encapsulates Spain's traditional struggle
against geography: Merely moving people and goods from point to point on
the Iberian Peninsula has always posed formidable challenges for
governments and traders. This rugged geography also led to the
development of small pockets of populations with strong national
identities, creating
tension between Madrid and the Basque Country as well as Catalonia.
Spain
has traditionally been a resource-poor country that has had to look to
the Atlantic to find wealth while frequently resorting to violence to
secure unity.
In contrast, most of Germany is flat. In May, I drove north along the Rhine,
one of the country's major economic arteries. The
river and its tributaries have blessed all of the people living near
them, bringing incalculable wealth to trading cities such as Frankfurt
and Cologne. The same holds true for the two other major German
waterways, the Elbe and the Danube. But wealth does not necessarily mean
peace. Both sides of the Rhine host multiple castles and
fortifications, a reminder of the state of fragmentation that defined
the Germanic world for centuries. The lack of any real physical borders
to the east and west also helps explain Germany's historical conflict
with its neighbors.
Highways in Spain and Germany highlight a more significant
difference. During my journey between Barcelona and Madrid, I barely saw
any cars, let alone trucks. At times, it was hard to believe I was
traveling between the two major cities in the eurozone's fourth-largest
economy. By contrast, Germany's autobahns are crowded with vehicles
going from one point to another. The same geography that made Germany a
place of conflict also explains its economic power: Germany
is the center of Europe from almost every possible point of view.
The farther one moves from Germany, the more evident the crisis
becomes. Traveling by train from Thessaloniki to Athens lets one see
Greece's complex geography firsthand.
Greece is a rugged country with narrow coastal plains that swiftly give
way to mountains. Complicating matters, the country has some 6,000
islands and islets, only a handful of which are inhabited. Greece's
extremely fragmented geography and its strategic position on the eastern
Mediterranean helps explain why it has struggled throughout history to
get anything done. Developing an integrated economy and collecting taxes
has proven difficult, especially while repelling a never-ending series
of invasions.
Walking down the streets of Athens reveals that this is where the
crisis struck first and has had the deepest impact. The city's downtown
is full of closed shops with broken windows, graffiti and other signs of
long-term neglect. In Athens, I saw far more police than in any other
major European city. But at no time did I feel unsafe. Police are not
out in force because of crime but because of social unrest. Though
Greece is relatively tranquil these days, the social situation is still a
ticking time bomb.
At the other end of the Continent, Portugal looks similar. I arrived
in early October, excited by recent figures showing a drop in
unemployment and an improvement in the economic outlook. What I found,
however, was a place where only tourism seemed to be working while
everything else remained static. Lisbon and Oporto are bittersweet
places where magnificent monuments and spectacular views coexist with
poverty and economic depression. Though Lisbon ended its rescue program
with the European Union and International Monetary Fund early this year,
for many Portuguese, life remains hard.
Talking Politics Across the Continent
Whenever I'm in a foreign country, I make an effort to visit
bookstores because the books people read and write offer insights into
the social mood. Bookstores in Southern Europe are a reminder that the
Continent's economic problems have become political ones too. The
gap between voters and traditional elites keeps
widening as people are becoming increasingly tired of the policies
designed by Brussels and backed by domestic politicians.
Perusing the shelves, I saw numerous books with significant
anti-austerity and anti-establishment themes, which in some cases took
an anti-German flavor. In an Oporto bookstore, among the bestsellers was
a book called
We Are Not Germans, while a Rome bookstore had a book called
It's Not Worth a Lira, a plea to leave the euro and return to Italy's old currency, that appeared to be quite popular.
Southern Europeans fear and admire Germany at the same time. On one
hand, Germany is seen as a country where everything works and
governments are efficient. On the other hand, it is also seen as a
hegemon that doesn't understand or care about the situation in the
nations it is trying to lead.
Europe's economic crisis is particularly puzzling for the
center-left. Social Democrats have traditionally embraced the process of
European integration because it offers economic prosperity based on big
welfare states and strong labor legislation. But this model is in
crisis in many countries, and even center-left governments are applying
spending cuts under pressure from the European Union.
In Italy, I had dinner with a former union leader as the
center-left's Matteo Renzi -- who had just been appointed prime minister
-- was proposing reforms in several areas, including labor. "I don't
like the direction Renzi is going," the former union leader told me,
"but I will vote for the Democratic Party again because it's either them
or the (anti-system) Five Star Movement." While conservative forces are
moving to the right and nationalist forces are gaining strength, the
center-left is going through an identity crisis that is generating
frictions within the parties and confusing their traditional voters --
something French President Francois Hollande is learning the hard way.
In Athens, a journalist told me she did not share the views of the
neo-Nazi Golden Dawn party, but at least it had never been involved in a
corruption scandal like those that have traditionally surrounded the
country's mainstream parties. Along with the concept of democracy,
Ancient Greece also developed the concept of kleptocracy. Whenever you
talk with Greeks about politics, a word comes to their mouths almost
immediately: "kleptes," which literally means "thieves." Most Southern
Europeans have similar views of their governments. And while there is a
big gap between what people say in conversations and the way they vote,
these anti-establishment sentiments are not going away anytime soon --
and will keep threatening the survival of the European Union.
A Continent of Expatriates
While the economic and political impact of the crisis is evident in
Southern Europe, its demographic consequences will take longer to be
noticed but will probably be deeper. Before the current downturn, these
countries had some of the lowest fertility rates in Europe, which,
combined with rising life expectancy, led to an aging and shrinking
population. The crisis made things worse because it generated high waves
of emigration.
In the short run, emigration helps reduce the pain of the crisis
because there are fewer people competing for jobs and more people
sending remittances home. In the long run, however, it creates fiscal
and economic challenges for the countries that see a decline in their
labor forces. The economic crisis is returning Southern European
countries to their traditional roles as places of emigration, where the
young leave and the old are left behind.
But emigration is also problematic for the receiving countries. The
rising number of refugees coming from Northern Africa and the Middle
East is generating concerns in countries including Spain and Italy as
well as Austria and Sweden. At the same time, immigrants from Eastern
Europe are pushing Germany and the United Kingdom to find bureaucratic
means to discourage them. In early January, an old lady in Frankfurt
asked me where I was from. When I told her I was Argentinian-Italian,
she smiled at me. She thought about her words and, after a while, said,
"Italians are fine. It's Romanians and Bulgarians I'm worried about."
The irony is that the same process that is creating political and
social tensions in Europe's core is helping to mitigate the negative
effects of a
demographic change.
In Germany, I met many expatriates from across Europe, most of whom
work at English-speaking companies with large Pan-European staffs.
European enterprises can pick their employees from a pool of highly
skilled workers from across the Continent without having to file
significant amounts of paperwork. While the pressure to limit
immigration is gaining momentum in Europe, I also expect businessmen to
fight it.
The View From Outside the Eurozone
The economic crisis is not only leading to friction within the
eurozone, it's also fragmenting the wider European Union. With Europe's
main powers focused on the problems within the currency union, many of
the newest EU members are feeling isolated. The re-emergence of a more
aggressive Russia is complicating matters for these new members.
Of all the places I visited this year, Poland is probably the most
interesting for the simple reason that its concerns are different from
those of Western Europe. I visited Warsaw in May to attend a conference
marking the 25th anniversary of the end of communism and the 10th
anniversary of Polish EU membership. The timing was also interesting
because the crisis in Ukraine was heating up, making the Poles
increasingly nervous about Russian moves in Central Europe.
I found that Poland was a country
confident about its economic strength but worried about its future.
History has given the Poles a deep understanding of geopolitics and too
many reasons to be worried about the events beyond their borders. I
visited Warsaw a few days before the arrival of U.S. President Barack
Obama. The excitement caused by his visit was a confirmation of Poland's
strategy of developing closer ties with the United States to help it
cope with a politically fragmented European Union and a hesitant NATO.
The Poles are proud of being members of the European Union, but they are
not completely confident that Brussels will come to their rescue should
the crisis with Russia escalate.
One Europe, Too Many Europes
Strasbourg is an excellent place to reflect on Europe because it is a
synthesis of everything that is great and tragic about the Continent.
The city looks German but feels French -- because it's both. Crossing
the Rhine from Baden-Baden to Strasbourg and seeing that there are no
border controls, and nothing to indicate that you've moved from Germany
to France but a small sign that reads "French republic," is normal for
anyone who was born in the past 30 years. But from a French king's order
to his men to "burn the Palatinate" in the late 1680s to a German
leader's invasion of France in the early 1940s, having peace between the
countries east and west of the Rhine is an anomaly rather than the
norm.
Six decades after the creation of the European Union, this is still
the key relationship to watch. The crisis has now reached a point where
its two main players are under extreme pressure. Germany joined the
eurozone under the assumption that no bailouts would be given to nations
in distress and no monetization of debt would take place. France joined
the eurozone under the assumption that it would remain the political
leader of Europe. The crisis has put all the promises and agreements
that supported the Franco-German unity in doubt.
Europeanists believe that things would be much better if the European
Union became a true federation. They are probably right. The question
is how to accomplish this. As Germany
learned during its unification in the 1870s and
confirmed during its reunification in the 1990s, building a large
united political unity out of smaller entities requires the
redistribution of money and power. But what should come first, money or
reforms? The European Union is currently seeing the worst of both
worlds: A monetary union without a fiscal union. In other words, it has
sovereign states that don't control their currencies and supranational
institutions that don't control fiscal policy.
We tend to think of Europe as a cohesive unit because there is an
entity called the European Union that has headquarters in Brussels and
is represented across the Continent. To a certain extent, this
perception is correct. But if anything, the crisis serves as a reminder
of Europe's perennial state of fragmentation, which is the consequence
of history and geography. These divisions led to the current crisis and
will hamper any attempts to solve it.
Editor's Note: Writing in George Friedman's stead this week is Europe Analyst Adriano Bosoni.
