Europe Is The Sick Man. Is The E.U. Doomed?

The following editorial was written by Ambassador Michael Gfoeller, a former Political Advisor to the U.S. Central Command 26 years (1984 to 2010) and as a US Foreign Service Officer who served under General Patraeus from 2008-2010 and David H. Rundell, the author of Vision or Mirage, Saudi Arabia at the Crossroads and a former Chief of Mission at the American Embassy in Saudi Arabia under George Bush Sr. and George Bush Jr.

I hope they are right and the EU implodes.

 

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Europe is the Sick Man
Facing shortages and growing populist movements – the European Union as we know it may be doomed

By: David Rundell and Michael Gfoeller

Europe is hurdling towards its greatest economic crisis since the 1930s. During the Covid pandemic, European governments increased demand with massive monetary stimulus packages while at the same time reducing supply by closing businesses and urging workers to stay home. This unleashed some of the highest inflation rates seen in a generation. Then came Russia’s invasion of Ukraine followed by Europe’s efforts to weaken Vladimir Putin with extensive economic sanctions. Those sanctions backfired. While the value of the ruble has risen, Europe faces energy shortages, inflation, and slower economic growth. These troubles are causing division and strife within the European Union, giving rise to stronger populist movements, and creating greater challenges for the United States both now, and in the very near future.

Government leaders in Britain and Italy have already resigned. In the Netherlands, Germany, Poland, and Spain, there have been multi-week protests by farmers and truckers. A wave of strikes has plagued the crucial airline sector. As these conditions are unfolding in Europe, millions of refugees fleeing similar problems in Africa and the Middle East are likely to start arriving on Europe’s borders. With food, fuel, and migration problems mounting, all of Europe’s governments will face increased unrest. Many more are likely to fall in the next six to eight months.

Fueled by cheap Russian energy, Germany has been the engine of European economic growth. Not any longer. The Germans have very little oil or gas of their own. They have long relied on Russia for roughly a third of their imports, but last month Gazprom’s exports of natural gas to Europe fell to their lowest level in decades. The essential Nordstream pipeline is operating at 40 percent capacity and President Putin has threatened to reduce flows even further. Meanwhile, Gazprom has declared force majeure on some European customers and some of Germany’s largest energy companies are facing bankruptcy.

 

Soaring energy costs have made German exports much less competitive, while growth in their largest market, China, is falling. German drivers are paying nearly ten dollars a gallon for gasoline. Germany’s Federal Network Regulatory Agency has warned consumers that household energy costs may treble next year. Even German steelmakers, who still need coal, and get much of it from Russia, are feeling the pain of sanctions. The net result is German inflation that now exceeds anything seen since 1960, combined with German GDP which is falling and expected to fall further.

 

Europe’s political leaders clearly sense what is coming. Hungarian President Victor Orban, who won re-election easily in April, now feels threatened by economic unrest. He recently condemned the EU’s Russia sanctions policies saying, “I thought we had only shot ourselves in the foot, but now it is clear that the European economy has shot itself in the lungs, and it is gasping for air.” Remarkably, Frans Timmermans, the Vice President of the European Commission, agrees with Orban. He has warned that due to energy shortages, Europe will see “very, very strong conflict and strife” this winter.

 

Europe is certainly trying to reduce the economic pain it will feel this winter. High-level emissaries have been dispatched to oil and gas exporters such as Azerbaijan, Qatar and the UAE, but this gambit will likely prove too little, too late. Europe has invested too little in the infrastructure needed for a rapid diversification of energy supplies. Russia continues to hold substantial influence over energy exporters such as Kazakhstan, Azerbaijan and Libya. The only country with the reserves and technology needed to produce a massive increase in Western energy resources is the United States, but it is seeking to reduce fossil fuel production.

 

In the past, economic hardship has often strengthened populist political parties hostile to European unity. For example, the recession of 2008 strengthened France’s National Front. In 2010, the party’s right-wing leader Marine Le Pen became a serious political player when the Front went from receiving 4.3 percent of the vote in the 2007 presidential election to 12 percent of the vote in the nation’s regional elections three years later. Now renamed the National Rally, Le Pen’s party just saw its presence in the French Parliament rise from 8 to 89 seats. Last week, the EU’s voluntary gas rationing plan was strongly opposed by Spain and Portugal. Expect more disunity in the future as national interests diverge.

None of this bodes well for the United States, which needs an economically strong and politically united Europe to help it maintain a rules-based economic order and to confront global political challenges. As the Euro sinks to parity with the dollar and budget deficits soar across the continent, Europe’s willingness to share military, economic or environmental burdens will become increasingly doubtful.

Ambassador Michael Gfoeller is a former Political Advisor to the U.S. Central Command. David H. Rundell is the author of Vision or Mirage, Saudi Arabia at the Crossroads and a former Chief of Mission at the American Embassy in Saudi Arabia.

 

 

 

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