Despite the rise of globalisation and rapid advances in technology, geopolitics is once again starting to play a key role in Europe. What does this mean for European leaders, and what will be the impact on the future of the euro? ECR Research investigates.
European markets have been in a relatively ‘good mood’ for some years. However, the list of political-economic and geopolitical challenges that Europe has to contend with is long and daunting. Opinions differ about the monetary policy the ECB should pursue. Some claim the central bank has done little more than put an artificial and fragile safety net under the Eurozone.
Furthermore, there is substantial discord on the degree of fiscal consolidation that will be required to restore Europe to health. On top of that, doubts about the robustness of the banking sector have not gone away and there are misgivings about the underlying vigour of quite a few economies. Also, it is feared that a paralysing anti-European storm of protests will sweep through Europe at the same time as ‘Cold War 2.0’ is about to break out.
Naive faith in globalisation?
Should optimistic views about globalisation like those of American foreign policy academic and author Michael Mandelbaum hold true, Europe may manage to defuse the crisis as new markets open, economic ties strengthen, and member states realise they have a common goal. Namely, to increase prosperity and profit from the ongoing technological innovation.
This unbridled positivism may be too upbeat. Technological advancement is not always a blessing. Increasingly, people find that the “Big Brother is watching you” nightmare is still there when they wake up. Mandelbaum (and others) seems overly optimistic and eager to turn a blind eye to the human talent of turning gold into lead.
The belief that there is a global consensus that a market economy is a prerequisite for the creation of prosperity may be partially true, but the concept is viewed in a variety of ways. Moreover, the credit crisis has highlighted the vulnerabilities of capitalism while soaring inequality undermines societies, as people like French economist Thomas Piketty argue.
The final argument that underpins this unwavering faith in globalisation states that politicians are now solely judged on how prosperous the economy is on their watch, with GDP almost the new god. But to quote Dutch columnist Bas Heijne: “Identity, religion, tribe, flag, nation, tradition, history, group loyalty, simplistic stereotypes of the enemy, dreams of glorious peoples and countries – the time has come to acknowledge that these are not exotic notions that belong in an earlier century. They are frighteningly contemporary. This storm will not subside.”
That geopolitics is rearing its head again shows that economics is not the whole story. The problem is that, so far, the politicians have used economic arguments to sell Europe to voters. One reason why Europe suffers blow after blow is that its foundations are perceived to be purely economic. Therefore its identity is wafer thin, particularly now that EU politicians seem unable to deliver in terms of growth and prosperity. Simultaneously, they are manoeuvred into a corner by a blatantly aggressive – albeit realistic – leader like Vladimir Putin.
Lessons from the past
Putin has used the Ukraine crisis to return to old-fashioned power politics. Many EU leaders are unnerved and alarmed. “This is no longer the way we interact,” they say. Well, apparently it is. We are witnessing a faltering and fatigued superpower, competing emerging great powers, social unrest, geopolitical tensions, and a Russian ruler who dreams of imperial expansion. Therefore it would be naive to rule out large-scale conflicts on the European continent, with global implications.
The belief that there is a global consensus that a market economy is a prerequisite for the creation of prosperity may be partially true, but the concept is viewed in a variety of ways.
This mistake has been made before. Namely, on the eve of the First World War, by some of the brightest minds around. Economic interconnectedness simply is not enough to avert war.
Another lesson we can draw from the First World War is that it was impossible to forecast based on trends in the preceding years and decades. On the contrary, according to Cambridge Professor Christopher Clark, the war resulted from “short, sharp realignments in the system which no one predicted.” As he lucidly explains, a handful of small unforeseen events that might seem mundane at first glance could have far reaching consequences “when politics fails, when conversation stops, and compromise becomes impossible”.
Still, a Cold War 2.0 seems unlikely (also because the appetite is lacking in the West and Russia does not have enough resources). Thankfully, a “Hot War” between West and East is not really on the horizon either. All the same, war is not extinct on the European continent. In fact, in times of economic turmoil, there could be more cause for concern, not less.
The SS officer and the Iron Lady
So far, the Ukraine crisis has done little to bring Europeans to their senses or prompt them to work together. Quite the opposite; the crisis has exposed the chinks in Europe’s armour. This is not surprising if we look at the evolution of the European integration project. On closer examination, geopolitics and power games have never been absent.
In 1945, SS leader Himmler wrote a letter to French leader De Gaulle in which the German laid out the options for France: “So you have won. Now what do you do? Join the Anglo-Saxons? They will treat you as a satellite. The Soviets? They will subjugate France and liquidate you. The only road for you is an entente with vanquished Germany.” De Gaulle saw that, to some degree, this message rang true. He saw the EU as “Greater France”. The Dutch historian Mathieu Segers cites a Dutch official: “The six without the UK (the nations that founded the ECSC, the precursor of the EEC) mainly mirror French egocentric politics… Germany will follow France’s lead but think to itself: later on, Berlin will call the shots in European politics.”
Some say that Margaret Thatcher had the same vision. For instance, she was greatly opposed to German reunification after the Berlin Wall came down. During an impromptu summit it turned out that she greatly mistrusted the Germans. She pointed out that during its first period of unification (1870-1945) Germany had constantly veered between aggression and self-doubt. Ultimately, this wreaked havoc around the world but it was equally traumatic for the Germans themselves. Thatcher believed that this gave rise to dangerous tendencies in Germany. Although the Germans voluntarily agreed to become part of a federal Europe, the British Prime Minister believed that this would provide Germany with the opportunity to grow into the dominant country on the continent. The aftermath of the euro crisis indicates that Mrs Thatcher had a point.
The cosy get-togethers and intrigues in Brussels have been good for Europe, which has been peaceful and prosperous for decades. However, growing affluence is no longer a given and now that geopolitics has returned to the continent, European citizens are no longer inclined to swallow the rhetoric.
Political firestorm to trash euro?
That brings us back to 2014: Berlin calls the shots as the euro is still going strong and markets appear cheerful. However, socio-economic repercussions of the crisis continue to cause suffering. Politicians, lawmakers and central bankers have their work cut out. They need to come up with credible monetary policy, healthy public finances, a resilient banking system, and sound economic foundations. Simultaneously, Europe is under pressure from geopolitical power games and anti-European populist nationalism, partly because of concerns over the degeneration of the welfare state, plus anxiety triggered by globalisation.
Socio-economic disparity widens into a yawning political abyss and it will be an uphill struggle to implement structural reforms. The cosy get-togethers and intrigues in Brussels have been good for Europe, which has been peaceful and prosperous for decades. However, growing affluence is no longer a given and now that geopolitics has returned to the continent, European citizens are no longer inclined to swallow the rhetoric. A new climate is emerging: less technocratic, more political and thus also less rational and predictable, more intuitive and emotional. The wind is getting up and storms may be about to strike.