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2010 and Beyond:

The European Union

by Mary Miller, Director of Research


The rise of Europe, specifically the European Union (EU), has been a strategic trend of interest for decades. The EU stands as the model of regionalization of sovereign states—a necessary step in the direction of globalization. Although the EU’s roots go back more than 60 years, the EU was officially created in June 1993, when a landmark treaty was signed in the city of Maastricht, Netherlands. The Maastricht Treaty established the basis for a common currency, a common judiciary, a common foreign policy, and a common military.

The European Union continued to expand its influence both politically and economically, emerging as a global power. In fact, Europe’s economy had grown steadily to surpass the GDP (gross domestic product) of the United States. The EU is currently comprised of 27 countries: Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom. Three additional countries are currently in the application for admittance process: Croatia, Macedonia, and Turkey (although recent events suggest Turkey is looking to strengthen its position in the Middle East and is not ambitiously courting EU membership).

According to the Europa website, the 19 remaining European countries not included in the EU are: Albania, Andorra, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Georgia, Iceland, Liechtenstein, Moldova, Monaco, Montenegro, Norway, Russia, San Marino, Serbia, Switzerland, Ukraine, and the Vatican City State. (The topic of Russia’s inclusion in this list will have to wait for another article.)

Europe Day

The foundation of the economic vision that united Europe is celebrated each year on May 9th as Europe Day. It was the Schuman Declaration, authored by French Foreign Minister Robert Schuman, that proposed the combining of coal and steel production for France and Germany. In his May 9, 1950 declaration, Schuman made his vision for peace via economic partnering clear:

By pooling basic production and by instituting a new High Authority, whose decisions will bind France, Germany and other member countries, this proposal will lead to the realization of the first concrete foundation of a European federation indispensable to the preservation of peace.

It was, however, Schuman’s use of the term “High Authority” that raised a red flag for Bible prophecy enthusiasts. Eu-rope has been a region riddled with war from the time it was colonized. The concept of sovereign countries voluntarily giving their governing rule to a “High Authority” sounded like a step in the direction of the Final World Leader. And it is.

The Euro

The development of a common currency was the next essential step to strengthen the economic unity of the EU. Although it took years, the euro was finally launched within the “Euro-zone” in 1999. The Eurozone is comprised of the 16 EU member countries (including Germany and France) that opted to abandon their national currency in favor of the euro. Currently, 11 EU member countries have chosen to keep their national currency (including the United Kingdom) or have not met the requirements to participate in the Eurozone.

When the euro was proposed as the common currency for the monetary union of member states, many of the smaller and/or poorer European countries were excited to join the Eurozone. It was a win-win situation for them. The value of their currency was stabilized and they believed the “big broth-er” economy of Germany was watching out for the neighbor-hood. Indeed, it was the German deutschemark that formed the underpinning for the euro.

Financial Crisis

The onset of the global financial meltdown in 2008, however, left some wondering if the European Union would survive in-tact. Conversely, as 2009 progressed, financial analysts pro-claimed that Europe was far ahead of the United States in its bailout strategies and financial recovery. The road ahead looked promising.

As 2010 dawned, though, hopes for continued recovery faded with the news of the economically troubled EU member countries known as the PIIGS (Portugal, Italy, Ireland, Greece, and Spain). [Note: Not all analysts support the inclusion of Ireland. While Ireland has deep budget deficits, it is not considered to be in the same “dire straits” category as the other countries.]

The crisis of the pending default of sovereign debt of the PIIGS countries left Europe’s investors scrambling to discover what happened. The primary focus has been on Greece. If Greece defaults on its debt (which means the country is bankrupt), the remaining troubled countries would fall like dominos. The resulting crash would threaten the economic foundation of the entire EU.

Chinks in the Armor of Economic Unity

The problems within the PIIGS countries are not a direct re-sult of the global financial crisis. The crisis simply supplied the perfect environment in which to showcase the chinks in the armor of the EU’s economic unity. The Maastricht Treaty set forth fiscal rules of operation for member states. It became obvious the troubled economies of the PIIGS countries never actually complied with these standards. In fact, Greece actually falsified its financial statistics to qualify for euro membership.

This fiscal irresponsibility remained conveniently hidden behind the strength of Germany. In the years following the creation of the Eurozone, Germany’s incredible production efficiencies allowed its exports to increase steadily—both as a share of total European consumption and as a share of the European exports to the globe. As a result, the Eurozone’s smaller and/or poorer member states gained access to Ger-many’s high credit rating and low interest rates for sovereign debt.

By 2002, the interest rate of borrowing money for the small-er countries was very close to that of Germany. Cheap money led to years of “unmitigated credit binging.” It was not until the throes of economic insecurity set in that some investors actually began to apply due diligence to their lending policies, albeit too late.

Investors assumed Germany would always be available for a “bailout.” However, Article 104 of the Maastricht Treaty and Article 21 of the Statute establishing the European Central Bank (ECB) actually forbid an explicit bailout of one member state by another member state. The European Commission (EC) responded by working with investors to reassure them, “panic is unwarranted.” The message has been slow to garner acceptance.

Germany – Big Brother

Germany’s geographic position in the center of the North European Plain places it in the path of both commerce and conquest. Pre-1945, Germany’s methodologies were clearly defined, regardless of the governing body: economic weight and diplomacy were employed to prevent multi-front wars. If those wars were deemed unavoidable, they were initiated at a place and time of Germany’s choosing.

Thus was Adolph Hitler’s rationale, in its simplest form, to initiate World War II. Europe’s current reliance on Germany began after World War II. France, under Charles de Gaulle, was first to see the advantages of a divided, post-war Germany.

In post-war recovery, Germany was not allowed a voice in global affairs. France realized it did not have the population or geographic position to support a leadership role on the global stage. An alliance of utility was born between the two countries that lasted for the next sixty years.

What de Gaulle instinctively knew was that the essence of a demilitarized Germany was still “Germany”—the largest European state in terms of population and economic size. In fact, when the Iron Curtain and Berlin Wall came down in 1989, reuniting East and West Germany, the modern state was born with all of its energies applied to economic growth.

And Germany’s economic prowess allowed it to repay Eu-rope financially for Hitler’s initiation of World War II. Ger-many paid for EU social stability throughout the Cold War; provided the bulk of the payments into the EU system without being a net beneficiary; and, shouldered the entire cost of German reunification while maintaining its payments to the EU.

It is Germany’s historical position as Europe’s strength that lulled investors into assuming the money would continue to flow. However, changes to the core monetary policies of the EU will be required to allow Germany to come to the aid of the PIIGS countries. Additionally, the German people are beginning to see themselves as a nation recovered from the past and growing stronger into the future. The citizens of Germany have protested any financial bailout of the weaker European countries.

Constitutional Crisis

Behind the public façade, the failures of consensus leader-ship and full integration of its member states have plagued the European Union since its inception. Toward the end of the 20th century, it became clear to numerous EU leaders that the foundations of European unity required renovation.

The Convention on the Future of Europe produced a proposal for the Constitutional Treaty for Europe. On June 18, 2004, the European Council in Brussels approved the Constitutional Treaty. It was signed in Rome on October 29, 2004 and was expected to be ratified by the 25 member countries at that time. However, when several attempts through the ratification process failed, the Constitutional Treaty was permanently shelved in 2007.

Efforts to find some common ground on which to move for-ward continued. On December 1, 2009, the Treaty of Lisbon entered into force, thus ending several years of negotiation about institutional issues. The Treaty of Lisbon amended the existing European Union and European Commission treaties without replacing them. It lays the legal framework and tools necessary to “meet future challenges” by creating:

1. A more democratic and transparent Europe;

2. A more efficient Europe;

3. A Europe of rights and values, freedom, solidarity and security;

4. A Europe as an actor on the global stage.

These goals were tested immediately as the financial crisis worsened. EU member states were in jeopardy of collapse and options for financial bailouts began to falter.

Confidence Shaken

Anxious eyes watched for leadership as an EU Summit was held in February 2010. One analyst summed up the reactions of many when he stated the summit ended with a very “EU-like” resolution. Essentially, the resolution cited grave concerns, political unity, and a commitment to address the economic issue at the next meeting. Despite the implementation of the Lisbon Treaty, recent months proved the Europeans are no better at crisis management now than they were a year ago.

The world was simply told that the EU stood “shoulder to shoulder” with Greece and that enhanced monitoring of the progress of Greece’s debt reduction measures would be con-ducted monthly.

Interestingly, much of the world’s media ignored new EU President Herman Van Rompuy’s press conference. Their attention was focused instead on the press conference conducted by German Chancellor Angela Merkel and French President Nicolas Sarkozy. Germany and France continue to walk in their alliance of utility and leadership in Europe.

Looking Forward

The coming celebration of Europe Day does not diminish the fact that European unity has lost its innocence in crisis. At the core, they remain foreign countries with some shared interests and some shared rivalries.

Some prophecy enthusiasts have postulated that a Final World Leader would rise from the ashes of post-war Europe. The development and rise of the European Union would serve as the perfect setting from which to expand into a unified global government. Though, envisioning a world leader rising from Europe is difficult at best given its current status.

Europe’s regionalization of member states, however, still serves as a blueprint for future global projects. Through the years, Europe has served as a lesson in the successes and failures of unification—lessons that can be applied by any student of history. One of the EU’s major failures is “consensus government.” As the Books of Daniel and Revelation reveal, consensus is not the platform of the Final World Leader.

Interestingly, the whole of the European Union is looking to Germany for answers and for financial support. Germany’s economic renaissance of recent years has given the country an opening to build support in Europe and to further its own agenda. After years of military silence, Germany is in a position of influence within the European continent not attained through centuries of military prowess.

In his book, The Next Hundred Years: A Forecast for the 21st Century, George Friedman makes a compelling statement regarding Europe’s future:

Europe is not going to regain its empire, but the complacent certainty that intra-European wars have ended needs to be examined. Central to this is the question of whether Europe is a spent volcano or whether it is merely dormant.

The answer to this question will become clearer as Europe’s fiscal policies and leadership roles are more clearly defined throughout the next two years. As with all countries affected by the global financial crisis, the International Monetary Fund, central banks, and global leadership are scrambling to ensure the first domino in Europe does not fall. But the cracks in the economic foundation of European unity will definitely stifle the future growth potential of the European Union.

Next month, this series continues with “2010 and Beyond: China.”

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http://europa.eu/index_en.htm.

Friedman, George.  The Next Hundred Years: A Forecast for the 21st Century.  United States: Double Day, 2009.


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