Monday, January 2, 2017

WILL EUROPE'S DISINTEGRATION ACCELERATE IN 2017?

During the Summer of 1971 I spent three months in Western Europe interviewing politicians and labor leaders as part of a research project designed to evaluate the level of opposition to the concept and implementation of the European integration process, which, at the time, was still in its infancy. Some were entirely opposed to the idea of giving up national independence and identity, others were concerned that the process was not taking place fast enough. On balance, the objective of creating a European Union was accepted as inevitably necessary to prevent a recurrence of the wars that wrecked the European continent throughout history.

That was 45 years ago. The initial alliance was created by the Treaty of Rome in 1958, and included Germany, France, Italy, Belgium, The Netherlands and Luxembourg, and would not be expanded until shortly after I spent my time there. The U.K., Ireland and Denmark joined January 1, 1973, and during subsequent decades the European Union expanded to include 28 member states. The optimistically anticipated inevitability of progress towards an ever-intensifying union did not materialize as smoothly as expected, however. The Schengen Agreements, which eliminated internal border checks and allowed free movement throughout the E.U., signed in 1985 and effective 1995, still suggested significant unanimity, even though the U.K., Ireland, and a few Eastern European members did not sign on. The 1999 roll-out of the Euro, intended to become the official currency of the Union, only attracted 19 members. But the big challenge came in 2004 when the European Parliament attempted to pass a treaty that would have established a constitution for Europe. This constitution was designed to replace existing treaties with a single document, and, among other things, allow for qualified majority voting to replace henceforth mandated unanimity requirements. But French and Dutch voters, in a referendum, voted against adoption, and killed the proposal.

One could argue over why the progression towards the establishment of a unified European state slowed, came to a halt, and regressed. Expansion may have been too great and too fast. New members were likely seduced by anticipated benefits of economic integration, but less inclined to relinquish much of their political independence. The rule that all states had to agree before new policies could be adopted stymied progress. More recently, however, several other significant issues accelerated the disintegration of what, up to then, had grown into one of the most important economic and political powers in the world. The 2008 recession identified a debt crisis in a number of, mostly Southern European, countries, placing significant stress on the Euro-Zone, and illuminating systemic problems within the organization. The overwhelming flood of migrants coming in from the Middle-East and Northern Africa put the continued desirability of the Schengen Agreements to the test, while strengthening nationalist and populist political movements in many member countries. The politicization of these influences created a crisis within the organization, which, in 2017, may well accelerate its disintegration.

In June of 2016 the U.K. voted to leave the Union. In January the British Supreme Court will deliver their verdict on whether Prime Minister Theresa May can use the "royal prerogative" and begin Brexit negotiations with the E.U. without approval of Parliament. If she is not allowed to, members could actually vote against the onset of negotiations and block exit from the Union. In March, in a general election, Dutch voters are expected to give Geert Wilders' anti-E.U., anti-immigrant, anti-Muslim Party For Freedom a majority in its House of Representatives. If he succeeds, the Dutch may also be asked to vote to leave the E.U.. France's presidential election is scheduled for April 23 (primary) and May 7 (general). Marine Le Pen, leader of the National Front, has a real chance of taking over the country's presidency. If she does, she has promised to hold a referendum on a French exit (Frexit). Germany holds its general election sometime between late Summer and early Fall. The nationalist AfD (Alternative for Germany), anti-E.U., anti-immigrant and anti-Muslim party will likely give Angela Merkel's Christian Democrats a run for their money. Italy's Prime Minister Matteo Renzi's recent resignation has left the door wide open for Beppe Grillo's Five Star Movement in an election that could take place later this year. Greece may be headed towards an election as well, since there are signs that Prime Minister Alexis Tsirpas seems to be positioning himself to defy his government's debt restructuring agreement with the European Central Bank.
And so it goes.

Whether the European Union will survive the populist onslaught remains to be seen. Thus far it survived many of the financial skirmishes resulting from the recession in 2008, even though significant debt related systemic issues remain. The more immediate, political, challenges confronting the organization are concentrated in many of its member states, and can't be resolved within its supranational structure. It is telling that roughly one third of the 751 members of the European Parliament are considered "eurosceptic." High unemployment, coupled with a growing refugee crisis affecting most member states, led to the election of these, essentially anti-E.U., MEPs. The average unemployment rate within the E.U. still approaches 10%, with Greece exceeding 23% and Spain hovering around 19%. These statistics won't diminish voter displeasure. The flood of non-European migrants, which produced a cultural identity crisis in many member states, is giving the political parties these eurosceptic MEPs represent the ammunition they need to advance their agenda. Those need to be dealt with in-country, and those are the ones that can eventually further the disintegration of the European idea. Poland and Hungary, countries which joined the E.U. as recently as 2002 and 2004, are already run by eurosceptic governments. Those are the movements to watch.

The next election for the European Parliament won't take place until 2019. A lot can happen between now and then. For those who don't think this issue is important to us, that Europe is far away, and what happens there won't really affect us, just consider that between the U.S. and the E.U. we transact about $1 trillion in business every year, that together we represent 60% of global GDP, that, strategically, we built the strongest military defense alliance in the world, and, as a bloc, we play a leading role in international relations. Disintegration will only benefit our adversaries. It will severely, negatively, affect our national interest.

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