Saturday, July 23, 2016

Euro-zone Post-Brexit Is A Bit Of A Snake-pit

The Euro-zone has entered the post-Brexit referendum stage. This stage and the future of the Euro-zone is certain to hold great challenges and increased risk. In my opinion, many people have greatly discounted the test awaiting governments faced with growing opposition to expanding the control of those in Brussels. Few people deny that major problems existed before the Brexit vote which will only embolden those wishing similar referendums to exit the union. The efforts of those in power to portray the Euro-zone as stable and not under stress have until now been successful but may quickly lose sway if millions of Europeans hit the streets in loud protest.

Few Women Support Less Secular Turkey
The proof that no panic currently exists as to the Euro-zone's demise is evident by how markets ignored and basically shrugged off the recent coup attempt in Turkey as a nonevent. The failed coup took most of the world by surprise, however, it is difficult to ignore the fact that since it occurred the political changes taking place within Turkey are in massive conflict with the values touted by the countries of Europe. Pictures of Erdogan supporters broadcast across the world often showed the streets were filled with men and no women. This reinforces the argument he is a deeply corrupt radical Islamist dictator that will use this coup to consolidate his grip on power and move Turkey away from its secular past.

The simple fact Turkey is rapidly becoming a horrible fit with other members of the Euro-zone that value human rights and the rule of law. This complicates its future integration into the union. Human rights groups are concerned that the clampdown currently underway is being carried out without due process and political opponents fear the government could squander the moral high ground it gained after the coup by attempting to further centralize power. Time will tell if this is going to create a country that will come together around a vision that is more inclusive or used as an instrument to fuel nationalism and expand Islamist fervor. The estimated number of victims of “Erdogan’s purge” has hit 50,000, but the final number will not be known for quite some time.

The lack of panic does not mean all is well. The growing anti-globalization movement which has gained support in developed countries across the world is very strong in areas of high unemployment and many people would like the option of voting against more political power flowing to a growing power grabbing bureaucracy in Brussels. The influx of people fleeing trouble in the Middle East and terrorist entering the area with them has added fuel to the fire and calls that governments do more to protect their citizens. The situation has gotten so bad when it comes to terrorism and safe travel that many Americans will simply not risk a visit to the area even though the dollar has strengthened against the euro.

Several terror attacks have shattered the calm Europeans have come to expect. The Bastille Day attack in Nice, France and a more recent attack on a train in Germany when a young male refugee attacked and killed riders with an ax outside W├╝rzburg. The attacker, who was shot and killed by police, was registered as an Afghan refugee a year ago and lived with a foster family in a Bavarian village. With violence like this occurring more and more often it is little wonder people are on edge and placing blame on German leader Angela Merkel who opened the floodgates offering both immigrants and refugees a new home.

Leaders Are Always Meeting, But Little Action
As usual, the meetings of leaders in Brussels and other cities yield little other than more meetings and photo opportunities. In an article not long ago I wrote about how the Euro-zone is a dysfunctional mess. Supporters of deeper financial integration cannot break through a roadblock from Germany and some of the other better off countries to secure agreement on a common scheme to protect bank deposits. This means the poor countries remain poor and the economic divide continues to grow. As usual difficult structural reform is lacking and the only real effort being made by politicians is to give the impression that leaders are hard at work trying to arrive at how to correct the problem.

Even as I write this article news is breaking of another massacre in Munich where at least 10 people have been killed. An 18-year-old gunman opened fire in a shopping mall, killing 9 and injuring dozens, the shooter who died from a self-inflicted gunshot wound and was of dual German-Iranian nationality. It is hard to imagine how these type of events don't add to the feeling Europe is facing a bleak future. With its economy remains mired it a funk showing little growth even after the ECB has pulled out all stops in an effort to foster growth. The governments have become bloated and many suffer under huge debt and obligations. This has left many people wondering if the best years of the economic union have passed.

It has become the chief pastime of those in power to meet and talk, enjoy a lavish dinner, then meet and talk some more, sadly action is seldom seen. The massive problems in Greece stand as a monument to Euro-zone inaction. For years the pledges to address the crisis as a common force has produced little in the way of positive results and the populace has grown weary. We continue to hear the promises of money and action to come, but nothing seems to get done. Mix in a few gems of unrest, such as the independence movement by Catalonia gaining strength in Spain, and it is easy to understand how fragile the Euro-zone really is.  

1 comment:

  1. A thoughtful article. As a Southern dentist of increasing years, I wonder sometimes why I give as much thought as I do to European or world affairs but I feel as if it is the tsunami effect--problems elsewhere show up on your door and it's good in Boy Scout fashion, to be prepared. If, as I think, it is time for a BIG change in direction from our global interconnected complex world to a more local model with a lot more "austerity", then no one really wants to go there--so we all drift..... Europe as an idea just no longer works. I have my doubts about the longer term viability of America despite 200 years of inertia as well.

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