Following the daily swings of the euro zone debt crisis, it can be difficult to focus on the long-term, bigger picture.
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Analysts at ECR Research in Amsterdam have attempted to take a step back and look at the crisis and its impact on Europe over decades rather than minutes.
Predicting that the US, China, India, Japan, Russia, Brazil and the EU will be the major global or regional powers over the coming decades, ECR Research warns Europe, with its sky-high debt, is most at risk of losing out in what Prussian-German statesman Otto von Bismarck once described as the “great game”.
“Of the seven main players the EU is by far the most vulnerable as some member states threaten to collapse under the weight of sky-high debts whereas most EMU (European Monetary Union) economies are insufficiently competitive,” said ECR Research chief analyst Edward Markus in a research note.
“Twenty years ago it might have been able to get away with this but now vultures are circling the continent that would love to exploit its weaknesses. Europe simply cannot afford to fall apart after working towards further integration for 60 years.”
If for example the EU wants to negotiate successfully with Russia over energy supplies it will need to speak with a single voice and do everything possible to stop Russian Prime Minister Vladimir Putin’s divide and rule policy.
“In recent years Putin and co have slyly played the European states off against each other so that Russia could demand very high prices and favorable terms of delivery. As a result the Europeans became more vulnerable and had to pay through the nose. Moscow still keeps its gas and oil cards close to its chest,” said Markus.
Defense is another area where the EU needs to work together according to Markus, who questions whether even France and the UK combined could keep up with the spending of China which has tripled spending on its military in recent years.
EU leaders know all this but as one official put it recently: “We don’t know how to get re-elected once we have done it”.
“So that is the question facing government leaders and their officials: How to rescue the euro and survive?,” said Markus who says the so-called Frankfurt Group, led by German Chancellor Angela Merkel, French President Nicolas Sarkozy, the European Commission, ECB and IMF is now in charge.
The policy is now to force through reform in spend-thrift nations, even if this means imposing new, technocrat governments. It is not yet clear whether this will be enough however, according to Markus.
“The Frankfurt Group is but one indicator that the European political and financial elite is prepared to spend a lot of political and economic capital to salvage the euro," he said.
“That two main obstacles preventing a solution left the arena with their tails between their legs within weeks after the Group was set up shows that this impromptu collective is very powerful<" he added.
Berlusconi had been playing a game of chicken with “Merkozy” and the ECB for a while and eventually had to blink first,” said Markus.
The EU summit in December will tell the world if the EU has the stomach for a lasting solution and the fight it would take to secure one, according to Markus.
“This summit is unlikely to produce miracles. The EU doesn’t do revolutions, yet meaningful evolutions are possible.”
