Diary

What Is Going On With The EU?

The EU has been an economic and political nightmare lately; previously stable countries like Spain and Italy joined the ranks of Greece, Portugal, and Ireland as unable to pay their bills. The French and Germans are trying mightily to save the Euro by propping up their partner nations, yet wherever nations impose even modest reforms to step back from insolvency, there are fiery riots. What is going on with Europe? The answer further demonstrates the world’s dependence on US leadership.

The EU has a $200bln goods trade surplus with the US, further, the US invests about $64bln in the EU annually. Total trade between the US and the EU is about $1.4 trillion, or nearly 9% of the EU’s GDP. Contrary to wishful bluster, the EU, like much of the world, depends heavily on US trade. When the US economy expands, the EU’s economy is similarly forced to grow, even without endogenous GDP expansion. With US economic decline and the devaluation of the US Dollar, this important base of EU support has weakened.

As with the US, the debt ridden nations of the EU cannot survive a prolonged economic slowdown. Debt and benefit obligations continue to grow while tax receipts cannot keep up. Tellingly, Europe’s high taxes did not save their socialist system from collapse, refuting Pres. Obama’s assertion that higher taxes is the path to solvency.

As Shout Bits predicted several months ago, Europe’s socialist-lite system of planned stability was a sham. Their welfare states, high unemployment, and rigid labor systems were being propped up by US trade and investment. Without the US’s stronger economic growth driving European exports, the EU is facing collapse.

The US also supports Europe militarily. If the US further rolls back its military support for Europe, the continent is essentially defenseless. Europe’s history is that of constant war, plus some invasions from Muslim Caliphates and the Mongols. As with Europe’s sense of moral superiority from its socialist governance, European peace is enabled by US leadership. NATO is simply a way for Europe to pretend that the US military is not policing the region, for without the US military, NATO would be an empty shell.

Politically, Pres. Obama is rolling back support for the EU. He has ‘reset’ relations with the corrupt Russians who capriciously shut off natural gas to parts of Europe. He has extended an ‘open hand’ to Mid-East fascists who bomb Europe and its allies. Perhaps due to simple incompetence, he has insulted and snubbed European and English heads of state. The EU’s stability by design depends on US political support. While political relations are not irreparable, Obama’s focus away from traditional allies is a threat to the EU.

The EU is in serious danger – stagnant economies, basket case failed states, riots, a permanent underclass of minorities that refuse to adopt European customs. Nearly all the elements of European stability come from the US, perhaps to the chagrin of Cognac sniffing elitists. Ironically, the only way to save Europe’s socialist stability is for the US to reject the European model. To save the EU from collapse, riots, and even war, the US must restore its own economic growth and world leadership that has kept Europe stable for nearly 70 years.