Wednesday, December 29, 2010

US Pessimism on Euro Crisis, New START

Two noteworthy US media pieces have blipped on the Euro-pessimism radar, so I thought I'd echo them. 

EurAm doesn't necessarily endorse these views in their entirety, though it's certainly closer to these than the euphoria sweeping parts of the anti-nuclear set. Regardless, at the end of the day, it's about the sharing of Europe commentary -- especially what's taking place outside of Europe, especially what's candid and controversial -- that allows you the reader to cut to the heart of transtatlantic debate.  

So away we go:

1) Count on The Hudson Institute for consistently euro-pessimistic, moderate-conservative commentary from Washington. In today's Wall Street Journal, Hudson's economic policy expert Irwin Stelzer lays out acid commentary characteristic of his firm in a 2010 EU year in review, excerpted below. Note the passing reference to the US Constitution, lending a spontaneously Euro-American comparative view to the succeeding lines. Stelzer also leaves off with an intentionally troubling final thought on China, and the economic and geopolitical capital it could gain as the eurozone tailspin continues.

"All else that happened in Euroland in 2010 pales into insignificance when compared with the decision to set up mechanisms for replacing—some say supplementing, some say monitoring—national decision-making on fiscal policy with control by the Brussels-based Eurocracy, amending the Lisbon Treaty to make that possible. This is the step that the founders of the euro always knew would some day be necessary. That day has now arrived, and they are delighted.
Or almost. For the price of this "more perfect union" (to borrow again from American experience, in this case the language of the Constitution) is allowing Germany to become a lot more than primus inter pares. Germany is the paymaster, and the price for the use of its stellar credit rating, and the strength of its still-expanding economy, is deference to the wishes of Chancellor Angela Merkel. After all, with about half her electorate aching for a return of the deutschemark, and an even larger portion unhappy about picking up the check for the partying Greeks, she has no choice but to demand control in return for cash. As Peter Zeihan of Stratfor Global Intelligence puts it, "Germany is attempting to trade beneficial benefits for the right to make policy adjustments that normally would be handled by a political union. It's a pretty slick plan…"
So here's how the euroyear ends. Greece, Ireland, Portugal and Spain will have to restructure their sovereign obligations, with investors on notice from Germany that they will face haircuts as part of the process of neatening national balance sheets. When these indebted countries restructure, not only their own banks but those in Germany and other countries will have to write down some of the sovereign and company debt on their balance sheets, just at a time when they will have to raise capital to meet new regulatory requirements. That will reduce their ability to lend to fund growth just when austerity is biting because of conditions imposed by the International Monetary Fund, the European Central Bank and the Brussels bureaucracy, the latter speaking on behalf of Ms. Merkel. Meanwhile, the ECB is doing its bit: last week it almost doubled its purchases of government bonds to prevent interest rates from rising.
Here's the farce. All of this absorption with internal matters has reduced the importance of the EU in international affairs, exactly the opposite effect the Europhiles had anticipated closer union would produce. An internal EU report notes, "Europe is no longer the main strategic pre-occupation of U.S. foreign policy… The U.S. is increasingly looking to new partners to address old and new problems." Worse still, as the year ended the players in this farce squeezed in one more meeting, this one in Beijing.
China has been pouring money into Africa and other developing nations in order to buy resources and, more important, influence. Now, says Wang Qishan, a Chinese vice-premier, his country will use its new wealth to support the euro zone. "We appreciate the support of China…" responded Olli Rehn, Europe's commissioner for economic and monetary affairs. As do his counterparts in the developing world."

Sounds a lot like fellow Hudsonite Herbert London's similarly dour column from May.  

One wonders if the multipolar, consensus-driven culture of the European Union is taking such a pounding by the euro crisis that Germany and other economically stable eurozone states are actually emerging into more polar, less equal community of peers ("primus inter pares," justement) than before the global financial crisis -- even as Europe's champions perceive a blessing in disguise in that the EU is growing more cohesive in its duress. 
2) The other blip roundly condemns the New START treaty and is also from the Wall Street Journal (yesterday's). It's from Mark Helprin, a prominent author of history and policy books on numerous periods and areas. He devotes particular focus on historical precedent in defense spending and corollary domestic economic health. I say domestic, but really, when US defense spending (or any kind of US spending) sneezes, much of the rest of the world catches cold. The most palatable of his work is cited below, and the full piece is here.

"As in the 1930s, the economy is the supposedly humanitarian excuse for reducing the military, although the endless miseries of the world will not be alleviated if due to an imbalance of power great and little wars rage across it. When Rahm Emanuel fled the White House on his way to torment Chicago, he thanked the president for being "the toughest leader any country could ask for in the toughest times any president has ever faced." One cringes to think how this pronouncement would strike Madison as the capital burned, Lincoln in the years of civil war, Wilson during World War I and the influenza epidemic, and FDR through the Depression and World War II."