The Sick Man Is Europe

by Dirk Ehnts, Econoblog101

The Pew Global Attitudes Project has its annual report out. It confirms what all European already know: disillusionment with the way the European institutions function. Democracy is a nice word, but in Europe, it is not one man one vote. The European parliament is too weak to go after the commission. The troika sits in many countries, potentially blocking legislation that would help those most affected and the ECB has stressed its mandate as far as it goes but can not do any more. Here is a vital passage:

The sick man label – attributed originally to Russian Czar Nicholas I in his description of the Ottoman Empire in the mid-19th century – has more recently been applied at different times over the past decade and a half to Germany, Italy, Portugal, Greece and France. But this fascination with the crisis country of the moment has masked a broader phenomenon: the erosion of Europeans’ faith in the animating principles that have driven so much of what they have accomplished internally.

The prolonged economic crisis has created centrifugal forces that are pulling European public opinion apart, separating the French from the Germans and the Germans from everyone else. The southern nations of Spain, Italy and Greece are becoming ever more estranged as evidenced by their frustration with Brussels, Berlin and the perceived unfairness of the economic system.

The way things are moving it seems that politicians still do not understand the causes of the economic crisis, still blaming too much government debt instead of macroeconomic imbalances caused by private sector investments that drove some real estate markets first into bubbles and then into busts. The austerity policies would be ridiculous, if it weren’t for the disastrous effects.

The political elites have been ingenious in preserving their power, which shifts back and forth from left to right with no change of policy. The price of continuing this policy is high. The rise of populist politicians that are able to win discussions because these are not dominated anymore by facts, theories and divergence of opinions but by frustration and anger. In this climate, Europe’s future is unpredictable. Whatever financial markets think about the situation (and stock markets break record after record), Europeans have lost confidence in their ability to solve problems. That is sad.