What Inspired America's "Drang nach Osten" Drive

 Democracy promotion is used by the current US government to hide the crypto-Nazi nature of its policies in Eastern Europe. This policy is actually emulating Athens' Delian League democracy promotion drive within allied city-states from the V-th century BC. In Ukraine, the US is unfortunately protecting a repressive regime with ultranationalists and neo-Nazis calling the shots.

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Arnold Toynbee was right when he argued that civilisations are not destroyed by external forces, but disappear from history by committing suicide. Five hundred years since its emergence, this is exactly the stage that Western civilisation is going through right now.

It is interesting to note that both the rise and fall of this civilisation have been determined by Catholic leaders: the papacy and the kings of Spain and Portugal in the fifteenth century; respectively, Joe Biden, Nancy Pelosi and Boris Johnson today.

It is difficult for many to understand what has happened to the US and UK-led West. Why on earth has it come into conflict with Russia? The misunderstanding is justified. Its latest policy towards Russia is not rational, but pure suicide. To quote a famous American general, the Ukraine conflict is "the wrong war, at the wrong place, at the wrong time and with the wrong enemy".

We can begin by recalling that the fundamental characteristic of the Western civilisation has been expansionism, either regional or global. Anyone who opposes such expansionism - economic, military, religious, or political - automatically becomes the sworn enemy of the West's leaders of the moment, whether we are talking here about the Spaniards, the French, the English, the Germans or about Americans today.

The French and Germans had mostly continental expansionist ambitions ("Drang nach Osten" was the official policy of the Third Reich and targeted Russian territories). The Spanish and Portuguese took over specific regions in the New World, Africa or Asia. The British colonised North America, but also Australia and New Zealand, and conquered India. All these past expansionist expeditions were supported in one way or another by the Catholic Church, which exponentially increased its fortunes and the number of believers.

In our own century however, US expansionism has global ambitions, although outside of the Western Hemisphere it has managed to impose itself only to a limited extent economically, but not from a military or political point of view, despite NATO's large membership. Americans have always been expansionists, their geopolitical thinking being dominated by what historians call the "frontier mentality." They managed to impose themselves on the entire North American continent and in Latin America in the 19th century, but the 20th century was not as favorable for them. In Europe, American expansionism was limited by the Soviets to the west and parts of the continent's centre. In Asia, the United States was stopped by China in its expansion into the Korean Peninsula and by Vietnam or Afghanistan in Southeast or Central Asia. 

The disintegration of the USSR and especially the separation of Ukraine and Georgia, unfortunately gave American neoconservatives the false impression that they could revive - in new forms - Nazi Germany's expansionist policy to the East, this time with them in control. This mega-error is now on the verge of destroying the entire Western civilisation, annexed as it is via NATO to the American locomotive. This despite many American political leaders realising that the era of Western expansionism is over and that its current chances of success are zero.

However, as America and Britain are now led by the abovementioned Catholic leaders, the Western alliance is making full use of age-old Catholic statecraft tools. To illustrate this, think of the massive use of private military contractors who currently fight to implement the US's global agenda, just as Spanish royalty used the conquistadores in the territories of the New World. This transfer of knowhow from the 15th century to the 21st cannot be but Catholic-inspired. These days, the American version of the conquistadores are the bosses of American PMC's, such as Blackwater or Titan, active in all theatres of operations, from Iraq and Afghanistan to Ukraine. This industry is now worth  240 billion dollars. The PMC's largely escape the control of US military authorities, being in the employ of the State Department or the CIA . People like Erik Prince, for example, are the modern-day incarnations of Pizarro or Cortes.

It is a tragic development that the West's current leaders prefer civilisational suicide - because that is what is going to happen if the US continues to fight Russia in Ukraine - instead of pursuing a rational policy of retreat to the Americas and of renouncing global ambitions. However, humanity as a whole may ultimately benefit from the downfall of Western civilisation, as ordinary citizens are fed up with the tragedies caused by the successive imperialisms of the West.

Russia's Bismarckian War in Ukraine

The war in Ukraine is in many ways puzzling, not only for the average European but also for seasoned historians who have failed so far to recognise or admit to its nature. This is so because, living as we are in a post-Cold War world and with a distant Atlantic power acting as the military leader in Western Europe, the actual nature of this war has largely been hidden from sight. 

As we all know, there are many types of wars. Hegemonic wars, like the ones France and Germany fought during the 19th and 20th centuries; straight wars of conquest involving the acquisition of real estate at the expense of one's neighbour, which was the main type of war during the Middle Ages; wars of extermination, such as the ones fought by the Americans against the indigenous Indians, or by the Spanish against the Incas; there are also civil wars, which are wars within the boundaries of one country which can provoke significant loss of human life, as it happened during the war of secession in the US during the 1860s. In Europe, we also experienced the ravages and devastation provoked by religious wars, which afflicted the continent for 30 years and ended with the Peace of Westphalia. Finally, there are small-scale wars such as border wars, which mainly involve countries in Asia and which do not represent a major threat for international peace.

The war in Ukraine is exceedingly rare and we can call it a Bismarckian-type war. Such a war takes place within a group of countries that do not only neighbour each other but also share the same culture or language and are part of the same ethnic group. The Germans experienced such a war between Prussia and Austria in 1866. 

A strongly militaristic Prussian state, built around Berlin, wanted to eliminate a second pole of power within the German world, Catholic Austria, which was dividing the German world and was making it impossible for them to unite into a more powerful political unit. This situation led to the " German war of brothers", or Deutscher Bruderkrieg.

The political leader at the time was the well-known Iron Chancellor, Otto von Bismarck. He spilled German blood during his war against Austria, but succeeded in his drive to unite most Germans around Prussia and remained to this day one of the greatest political figures in German and European history. (His legacy in international affairs was the advice - unfortunately not followed by his successors - that in order to have peace in Europe, a "good treaty with Russia" was paramount).

Like today, Bismarck's war was fought after the European continent experienced a long period of peace which followed the conclusion of the Napoleonic wars in 1815. The similarities do not end here. Prussia, like Russia, was no fan of liberal democracies, but rather an authoritarian state managed with an iron fist by its emperor and its chancellor. Like Russia in the nineties, Prussia had been  affected by the 1848 revolutionary wave in Europe - similar to the 1989 revolutionary wave - which sought to bring to power liberal-minded governments on the whole continent and generally democratise European political life. 

The Slav world also oscillates between two religious poles and two nations that would like to be considered as leaders. One is Russia, a militaristic Slavic "Prussia", which has weathered many national crises and defeated two major enemies in modern times (the French and the Germans). 

The second is - since the election of Karol Wojtyla to the Papacy - Poland. Its contribution to bringing about the fall of communism during the eighties, the implosion of the USSR, and its accession to NATO have rather adversely affected the minds of Polish politicians. Their hope is that by initially building Ukraine up as a client-state which is to be ultimately led by the Catholic element in that country, they would in time be able to challenge Russia together, for the leadership position of the Slav world. This is the main reason why Poland, which is militarily weak, is the most strident advocate of NATO intervention on behalf of Ukraine. But not being able to fight the Russians by themselves, the Polish leaders believe they have the cunning to push the Alliance to fight the war with Russia for them.

Russia felt that its primacy within the Slav world was being challenged by the Poles, who enlisted not only Ukraine's help but that of the Czechs and Slovaks as well, and in the end was forced to initiate a Bismarckian-type war in order to quell such plans. The Russians correctly assumed that such inter-Slav rivalries were a godsend to the advancement of Washington's unilateralist agenda, and to the final triumph -via Russia's defeat- of the neocon unipolar world project with America on top.

The only major difference now compared to Bismarck's times, therefore, lies in the existence of an extra-European superpower, the US, who has tried hard over the last twenty years to remain the sole leader in world affairs after the disappearance of the bipolar world. Still, it would be hard to believe that Americans would risk an all-out nuclear war with Russia, which is one of the champions of a multipolar world, in order to enforce their claim. For all practical purposes, by assisting Ukraine in its fight against Russia, the US and the EU are playing the role France played in 1866 in supporting Austria diplomatically. That, to be sure, will not make Ukraine win this or any other war against Russia.

 

US: from Nation-Building to all-out War

"Billions spent on the Kennedy School, grand strategies seminars, and the Georgetown School of Foreign Service has bought us an elite that's about to blunder us into a Ukraine war."(J.D. Vance)

In a few days from now, President Biden will host German Chancellor Scholz in Washington. The expectation of Washington neocons is that he will succeed in pressuring Germany to join a pan-European alliance against Russia. 

To be sure, the German refusal to send weapons to Ukraine - and thus help ignite a fratricide war between Ukraine and Russia - makes sense. Germany was right in refusing to join the neocon-inspired war against Iraq in 2003 and is even more justified in refusing to join NATO in sponsoring a war against Russia now.

Unfortunately, France is no longer led by a president as experienced or astute as Jacques Chirac: Macron seems willing to send troops to Romania, regardless of how pointless this is from a military point of view.

Since 2001 the US have embarked in quite a few military interventions or coups around the world, which were followed by a disastrous drive to promote nation-building: in Afghanistan (2001), Iraq (2003), Libya (2011) and Ukraine (2014). All these ill-conceived nation-building efforts have backfired miserably. Undaunted, the Washington neocons who have monopolised American foreign policy for the last two decades are now promoting a war by proxy, encouraging the Ukrainians to fight the Russians.

Since 2007 onwards, Vladimir Putin has cautioned the West against pushing the boundaries of NATO eastwards. His pleas went ignored and - at the NATO summit in Bucharest one year later -  the George W Bush administration officially announced the intention of the US to include countries like Georgia and Ukraine in the alliance (these efforts were thwarted by the refusal of France and Germany to endorse the expansion). In 2014, the US engineered a coup d'etat in Kiev, replacing Yanukovich with an American puppet regime that ultimately bled Ukraine dry and is at the origin of today's crisis.

Unfortunately, after 14 years of unsuccessfully calling for a stop to NATO's eastward expansion, the Russians were deliberately left with no other option by US negotiators than to put a stop to this expansion through military action against Ukraine. 

The fact is that the treaty they are seeking to guarantee Russia's security can only be concluded after fighting a war, not before.

Since the Age of Enlightenment, Western intellectuals have elaborated projects aimed at achieving "perpetual peace". Some of the fruits of this labour have been the multilateral institutions such as the League of Nations and the United Nations. Sadly, however, humanity has been confronted with some of its biggest and most devastating military conflicts regardless of such well-intentioned efforts. To this day, no lasting peace treaty has been able to be concluded without fighting it out on the battlefield first.

The recent, ill-conceived US nation-building efforts abroad have coincided with a period in American history when consensus has evaporated, the nation is deeply divided and American society itself is in danger of internal collapse. Sure, the Pentagon and the US Defence Department are against a war breaking out in Ukraine, but the neocons in Washington and their supporters in the military-industrial complex want it and will most probably get it. 

As long as the American polity remains unable to expunge from their ranks the neocons putting America's future in jeopardy, however, the string of military and nation-building failures experienced by the US is set to continue.

THE CRISIS OF DIPLOMACY II : " MAKE LOVE, NOT WAR " ☺

 

With each passing day, Western states are taking resolute steps towards becoming  irrelevant.

Woke ideology, left-wing feminism, critical race theory  are all undermining a civilization that seems determined to shed its  past achievements and give up the pre-eminent role it has played until recently.

States that are much less economically developed or that are more primitive from a social or political point of view are, as a result, becoming much more insolent and confident that they will soon take over the world.

A last-minute trend in the demise of the West is the so-called " feminist foreign policy, " which is sure to strike a blow at the diplomatic profession,  already badly affected  by the changes of the past 30 years.

Feminists who fancy themselves  as diplomats do not seem to understand that the essential role of diplomats is to sign peace treaties, to settle conflicts between states, not to catalyze them. Feminist assumptions about diplomacy being mistaken, their "contributions"  are useless. It's enough to consider the performance in office  of Madeleine Albright, Hillary Clinton or  Victoria Nuland and one gets the picture.

Thus, if  Albright had tempered the Baltic states' desire to become NATO members, for example, Russia would not have a casus belli today against the West. She was also responsible for botching the peace negotiations with Milosevic and for the bombings in Bosnia and Serbia from 1999. There are a few American IR specialists who have deplored the way NATO turned out after 1989. Thus from a military alliance tasked with keeping the peace in Europe, NATO has emerged as an aggressive organisation which started quite a few wars since 1999. In no small measure, this shocking shift in NATO's mission is the legacy of the first woman to become Secretary of State in the history of the US, and not that of  any "toxic" NATO general.

We should also remember the disaster in Libya patronized by the then head of American diplomacy, Hillary Clinton. Counter to the advice of the Defence Department , which was opposed to military action against Gaddafi, Hillary Clinton convinced Obama to authorize the bombing campaign in Libya, with devastating consequences .

One should not forget the "contribution" to peace in Ukraine made by Nuland , who personally oversaw the overthrow of the Yanukovych regime in Kiev...

So far, therefore, the presence of women in diplomacy has not shown that they are better negotiators, less aggressive than men, or better trained professionally. So where are the exaggerated claims of German feminists coming from?

When History repeats itself as a Farce

 

On the 20th of October the US Secretary of Defence Lloyd Austin visited Bucharest, where he met with President Iohannis and Defence Minister Ciuca. A day later, President Iohannis designated Ciuca as the next Prime Minister of Romania, to replace the disgraced Vasile Citu. 

At first, General Ciuca sought a parliamentary vote of confidence in a PNL minority government and failed. For his second attempt, President Iohannis enlisted the help of Romania's social democratic party (PSD), which he brought - against the wishes of many Liberal party members - into a coalition with the ruling Liberals, not before destroying the former coalition between the Liberals and a smaller centre-right party, USR Plus.

Iohannis - who for years has campaigned and got re-elected as president on an anti-PSD platform (which was regularly labelled by him as the "red plague") - has thus stunned most members of his Liberal party, as well as the country's leading writers and artists who had hitherto supported his policies and presidential bids. Moreover, he single-handedly imposed Citu as the new president of the Liberal party and provoked the expulsion of the incumbent party president, former PM Ludovic Orban, who was against undoing the coalition with USR Plus. (To fully understand the character of Iohannis, it's worth mentioning the fact that it was Ludovic Orban who had convinced his party members in 2014 to accept Iohannis and to support his presidential bid.)

Lloyd Austin came to Bucharest in the middle of the crisis provoked by the political clumsiness of the Romanian president. In all probability, he was the one who advised Iohannis to promote general Ciuca to the post of Romanian PM, the first general to lead the government since the end of WWII.

A historical retrospective is in order here. In 1940, Hitler was preparing the invasion of the USSR and badly needed Romania's oil reserves and military help. As a result, general Ion Antonescu was the prime minister selected to lead Romania during the war, with the support of Nazi Germany. The tragedy of Romania after 1945 sprung from the nefarious alliance concluded by Antonescu with Hitler, which ended up in the occupation of the country by the victorious Red Army.

As Marx was fond of reminding his readers, history can only be repeated twice: first as a tragedy, and the second time as a farce. 

To put things into perspective, it is fair to say that Putin is nowhere near as fierce an enemy of the West as Stalin once was. Lloyd Austin's efforts to prepare the Eastern flank of NATO for a Russian invasion of Ukraine are largely misguided. What's more, the American Secretary of Defence is guilty of gross interference in Romania's internal political affairs and of playing an identical role in Romanian eyes to that of Hitler in 1940. In other words, Lloyd Austin behaved in Bucharest like a Hitler 2.0 of sorts, provoking the ire of the Romanian intellectual and artistic elites who feel they're witnessing a grotesque political farce all over again.

The Canary in the Coal Mine

 Last December, Germany finalised a Comprehensive  Agreement on investment  with China on behalf of the EU, angering many EU members in the process. While somewhat understandable from a German point of view, the speed with which the agreement was concluded and the opportunity to do so in the current context leave much to be desired.

Before signing it, officials should have taken clues from last year's attack by the Chinese government on Australian exports. As dependent as Germany is on the Chinese market for a significant share of its exports, Australia has seen its barley, beef, wine, lobster, timber and even coal exports brutally affected by an official ban. China has revived its old imperial kow-tow policy, according to which countries around it could see their access to its market denied if the political leadership in Beijing feels slighted by them in any way.

Australia has displeased Beijing last year when it called for an international inquiry on the origins of the Covid-19 pandemic. The call was seconded at the time by the EU and is fully justified in scientific terms, even if the Chinese leadership preferred to give it a political spin. Soon thereafter the Chinese government started targeting Australian exports one after another on an almost monthly basis, trying to make an example of Australia should any other country try to follow in its footsteps. Problem is, Australia had signed a bilateral free trade agreement with China back in 2015, which should theoretically have protected the two countries' companies from such unwarranted political disputes. It follows that concluding treaties with China is not worth the paper treaties are written on and will clearly not protect anyone .

The EU-China investment protection treaty ( CAI) should not be ratified until the Chinese government abandons such harmful commercial tactics with Western countries like Australia, with which they have a free trade agreement in force. In this case, Australia is no more and no less than the canary in the coalmine for the EU, blinded - as it were -  by the false hope of enjoying normal economic relations with China.

Once it concludes major trade agreements, China succeeds in modernising and in boosting its own economy's growth. However, it does so at the expense of its trading partners, as its record attests when examining its economic relations with first the USSR and then the US.

This is why Australia's recent commercial predicament should be taken seriously in Brussels and should act as a powerful brake against the type of wishful thinking that disregards Chinese polity's true nature and its hidden geopolitical agenda.

Italy and the Euro

 

June 17, 2018

The change of government in Italy calls into question the German leadership of the European Union, which was myopic at best.
Italy has never benefited from the introduction of the euro. Its GDP per capita after the introduction of the common currency has stagnated. German-imposed austerity measures and the lack of solidarity among member countries in the euro club have contributed to transforming a once-promising monetary initiative into a fiasco. The common currency was supposed to bring prosperity and unity among its members. Instead, it brought misery in the South and pitched countries against one another (Joseph Stiglitz).
Sadly, nobody within the EU expects Germany to live up to the fact that it should have done much more to avert the euro crisis or to help countries in deep financial trouble. President Macron’s valiant efforts at reforming the Union and its common currency are likewise being torpedoed systematically by the German chancellor, who had lost touch with reality a long time ago and looks set to become the Union’s gravedigger.
In the current political climate, nationalists are gaining power in one member-state after another and xenophobia is on the rise. Such developments can only spell doom for the embattled Union, already weakened by Brexit and the debt crisis. Unfortunately, many economists or political analysts are not optimistic when it comes to the EU’s chances of overcoming its current woes. One can only hope that they are wrong and that the worst – i.e. the implosion of the Union – could still be avoided.

The Migrant Crisis: Why Germany Can't Cope

 February 1, 2016

The biggest refugee crisis in Europe since WWII looks set to get worse in 2016. The country most responsible for the huge inflow of migrants from the Middle East is, as we all know, Germany.

What is less well-documented is the fact that its state apparatus simply cannot cope anymore. Chancellor Angela Merkel is quick to reassure her national and European audiences that her country can handle the challenges of integrating a million refugees, but events have proved her wrong time and again.

The New Year’s Eve disorders in Cologne are, according to German police, just the tip of the iceberg. The sheer numbers of refugees Germany has agreed to accept have led to administrative and security chaos in a country known until recently as one of the best-run and most orderly in the world.

To be sure, last year’s huge refugee influx is only partly to blame. At least as important a cause has been Germany’s adoption of tough austerity policies in recent years, which had seriously affected the budget and capabilities of the police and civil service, both on a local and federal level. After years of hugely misguided austerity, Germany nowadays has 10,000 less police than in the year 2000. Since 2014, repeated requests by the Interior Ministry for the hiring of an additional 3,000 personnel have been denied funding by Mr. Schaeuble’s ministry, the latter being bent on balancing the German budget at the expense of its citizens’ most basic security needs.

What’s worse, nobody can expect this situation to improve anytime soon. Although the creation of 3,000 new posts has recently been approved, the new police recruits will have to be trained first, becoming effective only in 2019. Meanwhile, the safety of ordinary German citizens will continue to be affected by the chaos engulfing the entire country and the lack of manpower and resources needed to deal effectively with the migrants’ influx.

Why the Berlin Consensus is Toxic for the EU

 August 31, 2015

Over the past fifteen years, quite a lot of criticism has been levelled by the “MIT gang”° against what has become known as the Washington consensus. Very little or no public discussion, however, has taken place about its close European offshoot, the Berlin consensus.

Sure, there are some differences between the neoliberal economic thinking underpinning the Washington consensus concept and the Berlin consensus. For better or for worse, the pitfalls in promoting mass privatizations, currency and capital markets liberalization around the globe are too well-known to all to insist upon here. What the Washington and the Berlin consensus have in common, on the other hand, is the “one-size-fits-all” approach to solving economic problems.

The policies shaping today’s Berlin consensus have appeared during the nineties in connection with the introduction of the common currency. The main tenets of the Berlin consensus are derived from the German economic doctrine of ordoliberalism and the project of Walther Funk, Hitler’s minister of the economy.

Alas, what works for Germany does not work for the rest of the eurozone. The Maastricht Treaty, the budgetary and public debt rules and limitations, as well as the accompanying austerity measures have been enshrined, following the sovereign debt and euro crises, into the constitutions of most eurozone member countries. The six-pack and the two-pack compacts have also become part of the financial legislation of the eurozone.

And here lies the problem. The rigidity or inflexibility of the rules and principles on which the Berlin consensus is based, whilst it might favour an export economy like Germany’s, is playing havoc with economies like France’s and Italy’s, to mention but a few. The German obsession with very low inflation, low wages and zero budget deficit targets has provoked the stagnation of most eurozone economies. In the normal order of things there are surplus countries and deficit countries, since it is not possible to transform the whole continent into a global exporting powerhouse. This is the main reason why imposing the Berlin consensus on all of the eurozone’s member states is proving not only wrong, but downright catastrophic.

Still, compliant governments from France to Greece have made huge efforts to cut government expenditure, freeze or diminish wages and transform their consumer-led economies into export champions. Some, like Portugal and Spain have temporarily succeeded in doing so, but only by repressing internal demand, cutting wages and tolerating high unemployment rates.

The German way, unfortunately, is that of adapting the economy to the needs of price stability, and not the currency to the needs of the economy. For German policymakers, the flexibility has to come from the workers, not from the rules governing the economy. The fact that the eurozone has ceased to work – following the imposition of the Berlin consensus – is by now clear for all to see.

As it always happens when the groupthink phenomenon manifests itself, however, EU leaders prefer to justify the unjustifiable and to delay needed changes in policy until it will be too late to save not only the common currency area, but the EU as a political union as well. (The Eurogroup is a textbook example of groupthink.)

Accordingly, it is time for knowledgeable insiders – such as Yanis Varoufakis, for example – to clearly and concisely explain to the European layman why the Berlin consensus is toxic for the eurozone and what can be done about it. Surely, one cannot expect such a demanding intellectual effort to be undertaken by the likes of Wolfgang Schaeuble, Jeroen Dijsselbloem or say… the German Council of Economists. And, who knows? A timely and well-written book on this subject might even become a best-seller here in Europe.

°Note: The “MIT gang” is a group of leading American and French economists, such as Paul Krugman, Ben Bernanke, Olivier Blanchard, Maurice Obstfeld, who have studied economics at MIT at about the same time and have continued to promote Keynesian macro-economic remedies, as opposed to supply-side economic remedies, in addressing economic downturns.

Dark clouds on the Eurozone Sky

 August 3, 2015

In Wolfgang Schaeuble’s Germano-centric EU, no institution is more important – apart from his Politburo-like Eurogroup and the Office of the Chancellor – than his Ministry’s Council of Economic Advisers. The most influential adviser among them is Professor Hans-Werner Sinn from Munich, a Christian missionary-manqué turned tele-economist.

Like any good German, Professor Sinn has but a few ideas, but fixed, which he peddles forcefully with evangelic zeal in the national and international media. That is, when he is not using them as ideological tonic poured regularly in his Finance Minister’s ear.

When he doesn’t appear on TV to explain to his nation why the euro-crisis is like a bottomless pit for German money, or impart advice to the lawyer-trained flock which dominates the Eurogroup, Professor Sinn presides the Ifo think tank in Munich where he benevolently enforces – according to his hapless colleagues – a virulent form of “intellectual despotism”.

One of the fixed ideas Professor Sinn has advocated in the media and to Wolfgang Schaeuble since 2012 is of course that of Grexit. He is apparently convinced that countries like Greece and Portugal would need an internal devaluation of their wages and pensions of between 30 and 40 percent in order to shore up their competitiveness, compared to a 10 to 20 percent devaluation in Spain and Italy. Such steep reductions would not possible without generating huge social strife within the European Union, therefore Greece or Portugal should temporarily exit the eurozone. Thus, instead of resorting to this internal devaluation (read drastic reductions of salaries and pensions), they would revert for a while to their national currencies, which could be devalued and used as shock-absorbers while at the same time reducing their debt load via haircuts.

This simplistic way of trying to “solve” a complex situation has been lapped up by Wolfgang Schaeuble, like he did with another incredibly stupid idea: the “schwarze null” option as the main goal of budgetary policy. (It seems that neither surpluses nor deficits are desirable in Schaeuble’s world.)

To make his ideas triumph, Hans-Werner Sinn has blown out of the water all other options, such as “dexit”, or two EU currency zones, which was put forward as early as 2011 by a much more thoughtful colleague of his from Munich, Professor Alfred Steinherr. How exactly has Sinn achieved that ? By presenting – in a 2013 Project Syndicate commentary – the dexit option as if it were just another zany brainchild belonging to George Soros, knowing full well that in European capitals the billionaire’s reputation alone would be enough to kill any further debate on dexit.

Since the 13th of July 2015 diktat from Brussels, Professor Sinn and the five “wisemen” from the German Council of Economic Experts have aggressively started a campaign aimed at arming the Eurozone with new rules and procedures that would make the eviction of financially-shaky EU members easier. As lawyer-trained politicians generally find it hard to grasp complex economic arguments, this proposal could become EU official policy tomorrow. This could only make matters worse, as the adoption of exit rules will not contribute substantially to addressing the euro’s and the eurozone’s plight.

 

Undoing Germany's "Reluctant" Hegemony

 July 30, 2015

To those in the know, the Italian peninsula was not only the cradle of the Roman Empire or Rome the centre of the Catholic faithful, but also the birthplace of capitalism and of countless statecraft innovations and institutions still widely used around the world today.

During the middle ages, the Italian city-states thus discovered and perfected what is commonly known among IR specialists as the “balance of power” mechanism. Every time one of the city-states became too powerful economically or militarily and tried to subdue the others, most of the rest of the city-states would form a coalition against the offender, thus preserving their sovereignty over their economic and political affairs.

This time-honoured tradition continued long after the development of nation-states and was successfully used to control the hegemonic designs of European powers, such as France or Germany, to give but two of the best-known examples. For the past two centuries, until some sixty years ago, balance-of-power arrangements were initiated, financed and operated by Britain, which succeeded in defeating both Napoleon and Hitler and in bringing their hegemonic designs to an end. British leadership in this field prevented the loss of sovereignty by continental nations and during the 20th century it preserved democracy and the rule of law, albeit not always by peaceful means.

It would be a mistake to believe that old hegemonic designs nurtured by economically more powerful European nations have vanished since the creation of the European Union. If anything – as demonstrated by the recent developments from the 13th of July 2015 – such hegemonic efforts which chiefly belong to Germany are played out within the existing political structures and institutions of the European Union.

Institutions such as the Eurogroup, although they do not have a legal existence, nevertheless wield enormous power over the economic and financial affairs of EU member-countries since the introduction of the euro. Within this group, Germany plays the leading role and with the help of a few satellite-states makes all the important decisions.

There are other EU institutions, such as the ECB, the ESM or the Commission, that are manned by technocrats who have more decision-power than any elected political leader of any country. Here too, Germany has succeeded in throwing its economic weight around and has used the European Union’s design imperfections to establish its de facto leadership .

Reluctant or not, German dominance within the EU is by now an established fact and should be actively resisted by the rest of the EU member-states, like any other hegemonic episode in our continent’s history.

When one country becomes economically or militarily too powerful at the expense of all other members of the group it belongs to, there are usually two standard responses to such a situation: bandwagoning or balancing.

Today, countries like Austria, the Netherlands or the Baltic states have preferred to bandwagon, becoming German satellites in the process. They have displayed a propensity to endorse Wolfgang Schaeuble’s vision of “reform” for the EU’s structures. The German Finance Minister has declared during a conference at Brookings Institute in April 2015 that even Germany’s former arch-rival France, not only Greece, needs to be “restructured” by a troika, citing however “democracy” as a temporary stumbling block…

The other response – that is balancing – is the preferred method of Italy and France, consummate operators of balance-of-power mechanisms in the past. This is how Shahin Vallée, former advisor to ex-President Van Rompuy, has recently described the current situation in The New York Times:

“This forceful attitudes and the several taboos it broke reveal that the currency union that Germany wants is probably fundamentally incompatible with the one the French elite can sell and the French public can subscribe to. The choice soon will be whether Germany can build the euro it wants with France or whether the common currency falls apart.

Germany could undoubtedly build a very successful monetary union with the Baltic countries, the Netherlands and a few other nations, but it must understand that it will never build an economically successful and politically stable monetary union with France and the rest of Europe on these terms.

Over the long run, France, Italy and Spain to name just a few, would not take part in such a union, not because they can’t but because they wouldn’t want to. The collective GDP and population of these countries is twice that of Germany; eventually, a confrontation is inevitable.”

Since the 13th of July 2015, the number one priority in most EU capitals is no longer the Greek crisis, but how to deal with Germany’s latest hegemonic offensive. Ideally, a “Dexit” followed by the formation of a two-union Europe along the lines I have described in my earlier posts could replace the current dysfunctional union. Alternatively the union might disintegrate, USSR-style, into a myriad of nation-states large and small, dominated by populist or nationalist governments. Such a development, however, would gravely affect economic life as well as the security situation on our continent.

EU: Grexit or Dexit ?

 July 19, 2015

Some seventeen centuries ago, emperor Diocletian realized that the Roman empire had grown too big and too diverse to be ruled from a single centre. Diocletian therefore decided to split it in two, the west ruled from Rome by a fellow army officer and the east controlled by himself. The east-west division became more or less permanent during the reign of Constantine. It was a wise administrative decision, which saved the integrity of the empire for another hundred years.

Fast forward to the present. The European Union, built on the ruins left behind by World War II, is experiencing a similar if not identical predicament. The citizens within its 28 member-countries, are growing more and more disenchanted with the Union’s leadership by the day. Truth be told, the EU has become much too big, too culturally diverse and politically unresponsive to continue to be viable in its present form.

One of the chief characteristics of the current political arrangements in the EU is Germany’s hegemonic status over its economic and political structures. As we can all recall, the Union was formed in the wake of WWII in order to prevent yet other military conflicts on the continent, involving again mainly Germany and its neighbours. To that end, an initial nucleus of six states (France, Italy, West Germany, Belgium, the Netherlands and Luxembourg) created an economic union which helped all of them rebuild their war-shattered economies and prosper. The victorious powers led by the United States forgave Germany most of its debts, opened up their markets to German-made goods and supplied the seed capital necessary (Marshall Plan).

For six decades the European Union grew, expanding southwards and eastwards, while the German economy became a powerhouse on the continent. In the wake of the fall of communism and the implosion of the USSR, West Germany had reunited with East Germany, and started to dominate not only the continent’s economy but also its political and – since the introduction of the euro- its monetary affairs.

The latter developments have unfortunately proved to be an unmitigated disaster for all its other EU partners. In truth, events over the last decade – the financial crisis, the sovereign debt crisis, austerity policies – have conclusively proved to many specialists that Germany, with a group of northern Protestant countries, has a vastly different set of economic responses and values, which are at odds with those prevalent in the southern part of the EU.

Thus, while Germans and their allies highly value a strong currency, low or zero inflation, low or zero budget deficits, a culture of thrift and the continuous reduction of public debt, countries like Italy, France and Spain – not to mention Greece, Portugal or Ireland – would prefer a significantly weaker euro, flexible budget deficit targets, higher inflation, the resorption of public debts through economic growth instead of austerity measures, and a massive reduction in the unemployment rates affecting them.

So far, Germany has succeeded in forcing all EU members to adopt its “six-pack” and “golden rule” and to maintain inflation close to zero. The outcome of these policies on the continent has translated into economic stagnation, social strife and a never-ending obsession with austerity and public debt reduction measures.

The current Greek crisis has merely highlighted the folly of such policies, as well as the unshaking determination of the German leadership to push the entire continent towards economic ruin. To avoid this, which could only lead to an USSR-type implosion of the Union, it would be more rational for Germany to leave it, reintroduce its beloved deutschemark and form an economic and political union of its own in the north of the continent. In other words, for the European Union to be saved from impending collapse, a “Dexit” option – and not “Grexit” – is what is currently needed. (Greece would not be able to threaten the survival of the EU the way Germany does.)

A Dexit should by no means be an acrimonious affair, or a disorderly one. Angela Merkel herself had alluded to the possibility of forming a Baltic Union as early as 2008. Starting with 2012, economists such as Alfred Steinherr, Anatole Kaletsky, Michael Mross, Aleš Michl, Kenneth Griffin, Anil Kashyap, Guillermo Nielsen, Ashoka Mody , Rolf Weder and Pedro Braz Teixeira have started recommending Dexit as the solution to the EU’s current economic and political predicament. The advantages of Dexit are clearly explained in a Time article from 2012:

 

“By contrast, if Germany were the one to leave, the euro would be the currency that falls in value, relative to Germany’s new national currency and also to the dollar. The weaker European countries would get to keep the euro but still get the devaluation they need, which would reduce their labor costs far less painfully than through wage cuts. In addition, the value of their outstanding debt would decline along with the value of the euro, and they would be more likely to be able to make payments on that debt and avoid defaulting.”

 

Viewed in this light, the third Greek bailout about to be concluded is rather of secondary importance. What is now needed is to start planning for an amiable and orderly Dexit, one which would benefit all EU member states. Failing to agree with the partition of the current Union into two entities – namely, an European Union centered around France and Italy and a Baltic one centered around Germany – could only result in a violent, USSR-type disintegration, accompanied by social strife, the revival of nationalism and xenophobia on our continent. Fortunately, such a partition will not lead to military conflict between the two sides further down the track, as NATO will still be there to prevent any such developments.

EU Decision-making: Going the Wrong Way About It

 

January 31, 2012

We’re heading towards a Soviet-style union run by a Politburo made up of national political leaders uninterested in consulting the European Parliament on important decisions affecting our lives.

Whilst in Brussels where the EU heads of government were busily hammering out measures aimed at solving the euro-crisis, Martin Schulz held his first speech as President of the European Parliament. He rightfully incriminated the cumbersome and un-democratic way EU political leaders make decisions bearing on the future of Europe’s almost half a billion citizens. To be sure, the EU is not a fully functioning union yet and the fiscal arrangements concluded on January 30th only serve to reinforce this.

As Martin Schulz has complained, the European Parliament is rarely consulted before a vital, Europe-wide decision is made. Indeed, it seems national leaders act as a veritable Soviet-style Politburo. The German chancellor, like Russia’s leaders had within the Soviet federation, is increasingly able to railroad the other national leaders into agreeing to policies that will ultimately bring about… the unravelling of this union, as well. We have been used to comparing Germany to the other exporting powerhouse, China. So why compare it to Russia now? To their credit, the Chinese are pouring tens of billions of dollars into infrastructure projects within their ASEAN neighbourhood every year, sometimes without even being asked. Moreover, they are buying hundreds of billions of dollars worth of US treasury bonds, only to keep their business partner afloat and able to buy Chinese goods. Would anyone see the Germans doing likewise ? Not unless they really had to, and then on condition they get to take over the fiscal management of the country in need of assistance.

Look no further than the adoption of the so-called «golden rule», as a panacea for solving the sovereign debt crisis and so much more (!). Unfortunately, however, most of the countries that were forced to adopt austerity measures aimed at balancing their budgets have been beset by huge social turmoil, du jamais-vu in post-war Europe. To the current leaders who met in Brussels on Monday, warnings constantly issued by Nobel prize laureates like Joseph Stiglitz or leading economists like Martin Feldstein seem to matter little, if at all. If the trend continues, I sincerely wonder who is going to be left with enough funds to buy German cars and German machine tools around here… As Christine Lagarde has courteously reminded her German hosts recently, for every surplus country like Germany, there have to be a number of deficit countries left, in order to absorb its exports. There’s simply no other way about it. This is why the «golden rule» can only have a boomerang effect on the German economy, but to people affected by political myopia, that, of course, is no valid reason to desist.

And what if the European Parliament, since the spring of 2011, was in favour of the introduction of eurobonds? Nobody has invited its representatives to have a say at the summits where such decisions are taken. Let’s face it: for complex issues, inter-governmentalism as a decision-making mechanism has proven highly detrimental to the running of the Union’s affairs. More often than not, the Commission and the European Parliament look on as powerless spectators of the ongoing series of policy blunders which, instead of solving the crisis, aggravate it.

Whilst national governments are being constrained to stop much-needed investments in infrastructure and other projects, the European Commission is supposed to pick up the slack and spend some 82 billion euros on regional projects in order to kickstart growth. Now, if anyone believes that this sum is going to make a significant dent in the continent’s unemployment, good luck to them. Sure, as Martin Schulz has observed, the adoption of a 0.05% financial transactions tax would bolster the EU’s budget by 200 billion euros per year, but who listens to Euro-parliamentarians ? As in the illustrious Soviet example, apparently nobody…

Author : Spotlight on Geopolitics
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External Relations  , E.U., euro

Towards a two-union Europe ?

 January 15, 2012

Standard & Poor’s decision this week to downgrade the country ratings of France, Italy, Spain and Portugal, not only aggravates the sovereign debt crisis, but it actually divides the EU in two.

The most affected group is made up of the Latin countries bordering the Mediterranean. Their interest bills are going to rise to levels that, in some cases, will make it prohibitive to finance their budget deficits and therefore to continue to provide quality public goods and services to citizens. To make matters worse, this group of countries has to swallow the bitter German pill of budget austerity at a time when long-term economic recession and possibly even stagflation look increasingly likely.

The second group of countries, headed by Germany, has kept their AAA credit rating. It includes Denmark, Sweden, the Netherlands and the UK, for example. Switzerland and Norway also belong to this group, although they are as yet unaffiliated to the EU. The main preoccupation of Germany and its like-minded northern European partners is fighting inflation, not unemployment. This is in sharp contrast with the economic philosophy of the Latin group of countries, which are quite tolerant of higher levels of inflation and budget deficits, provided these are used to significantly bring down unemployment.

Whilst a two-speed Europe might not be in the cards, in a not too distant future we might be faced with the prospect of two separate European unions, built out of the ashes of the current one. Thus, as Angela Merkel herself threatened in 2008, the Germans might be more interested in building a Baltic union, which could conceivably attract Russia as an associate, whereas the Latin countries might wish to explore further a separate Union for the Mediterranean that could potentially integrate Tunisia, Morocco, Libya and Algeria.

As far-fetched as this sounds, such an outcome might, however, prove to be the only solution to having a too-large and dysfunctional union, in which national interests prevail at the expense of the greater good of all existing members. In truth, the provisions of the Maastricht Treaty, the austerity packages and the German insistence on having an European Central Bank solely dedicated to fighting inflation do not work in practice for a majority of EU members, and especially for the first group of countries mentioned above. At this point in time, all good ideas aimed at solving the EU’s woes — such as fiscal union, the emission of eurobonds, a central bank dedicated to fostering employment, a common defence and security policy that works — have been discarded by Germany and some of its closest allies. In these conditions, no expert or responsible politician could be blamed if alternatives to the current union arrangements are actively being considered by them.