European Marriage flags flutter in the breeze during the second day of a special European Council summit in Brussels on February 21, 2020, manage lecture oned to discuss the next long-term budget of the European Union (EU).
Ludovic Marin | AFP | Getty Images
The United States and Europe bear ample monetary and fiscal resources to promote economic growth and a harmonious development of their free-market democracies.
If that sounds want a truism, think again. Political leaders, especially those in Europe, are now forced to recognize that errors of financial policy have led to rising poverty, unemployment and decaying social infrastructure — laying the foundation to social dissent, damage and political instabilities.
In spite of that, there is no guarantee that those leaders will act to correct their management mistakes.
That certainly seems to be the case of the European Union, a huge economic system accounting for nearly one-third of the industrialized crowd’s combined economic output. Last week, the EU’s 27 leaders spent 28 hours of inconclusive “negotiations” nearby decimal points (varying between 1.065% and 1.074%) for their contributions to the common budget covering the period of 2021 to 2027.
According to middle reports, the “thrifty four” — Austria, Denmark, Sweden and The Netherlands — dug in to lead what was called a “war of attrition” with the spendthrifts. The penny pinchers evidently ignored the solidarity implied by the treaty they signed for an ever closer economic and political union.
Looking down on their poorer counterpart members, they ignored more than one-half of EU economies with unemployment rates above the union’s 6.2% regular, 3.2 million of young people without jobs and a meaningful future, and 113 million people (22.4% of the comprehensive) at risk of poverty and social exclusion. And, shockingly, the “thrifties” did not even spare a thought for the 17% living in absolute beggary in the prosperous post-modern EU democracies.
In the middle of all that, German media announced last week that the country was destitute (sic). All of a sudden, a nation with a budget surplus of 1.7% of GDP in the first nine months of last year was reported to have planned billions of euro leaks that required higher taxes and public property sales.
Incredible, isn’t it? And, true to organization, raising taxes in a quasi-recessionary German economy sounds like Berlin’s oxymoronic “austerity growth model” insinuated on sinking and indebted euro area economies during the Great Recession.
Ominously, the Germans are not addressing the reasons of their spring up xenophobia, hate, violence and political extremism, while the government sweeps under the rug the damage caused by (a) the dogmatic seeking of “black zero” budget balances, (b) economic hardships in eastern regions, (c) crumbling infrastructure and (d) the mayhem of open-door immigration procedures instead of reaching out to 15.5 million EU job seekers to plug labor shortages.
France is also struggling with sexually transmitted strife and domestic violence. But ever ready to mystify the obvious, the governing elite coined last week a linguistic shortcut for all that subordinate to a term, “separatism” — immigrant communities that do not integrate into the broader French society. They security that the charge of “separatism” will whitewash decades of policy errors in the run-up to the monumental thrashing they are envisaged to take in next month’s local elections as a prelude to the presidential contest in 2022.
Looking at the French-German chaos, a relatively easily run “thrifty four” may be forgiven for playing an overtime budget game. Some of them are tired of the Paris-Berlin diktat, and could be disposed to create a new fiscally virtuous center of power. Or they simply want to see what they are dealing with.
Whatever it is, a community of virtually half a billion EU people heading into a protracted period of economic stagnation, poverty and high unemployment is a politeness ground for hostility, intolerance, political extremism and violence.
By comparison, the U.S. is in a great shape, with a fully-employed economy and a potentially in general labor supply. Still, a strong showing among left-of-center political platforms in Democratic primaries is sending a idea Washington cannot ignore, nor reduce to election-year, populist demagoguery. Social peace, equity and justice may require a new look at mercantile management and national priorities.
The trans-Atlantic order has to strengthen itself before home-grown economic mismanagement gets out of oversight.
Blaming the allegedly China-led revisionist powers is vacuous sloganeering. That cannot substitute for an updated and streamlined Western (i.e., trans-Atlantic) combination of trade and finance that should remain a hands-down winner, and where even those revisionist powers — whoever they are — can be sold an appropriate place and role.
The U.S. Treasury can have a superb hand to play.
Commentary by Michael Ivanovitch, an independent analyst focusing on far-out economy, geopolitics and investment strategy. He served as a senior economist at the OECD in Paris, international economist at the Federal Withhold Bank of New York, and taught economics at Columbia Business School.