Europe – An Indicator of Decline
The European Union had always been founded on rotten foundations. 28 nations ranging in size from 80+ millions down to a mere 400,000, with huge differences in their economic histories, cultures and potential, were never likely to make easy economic bedfellows. The difference between the haves and the have nots had been there for all to see since 1900. Suffering and hardship was always the more entrenched the further South and East you looked across this beautiful continent and the closer you were to the malevolent impotence of Russia.
Now that Europe is starting to unwind, the leading indicators are to be seen more clearly as you look South and East and the more you note Russia’s eagerness to meddle.
Spain’s markets are being roiled by internal strife, political scandal, and the Catalonian search for independence. In Italy, economically split between the North and the South, populist extremists are attempting to form yet another government and talk of leaving the Union. These are structural episodes that a nation could perhaps cope with in normal times.
But these are not normal times.
The United States is no longer a trusted partner in trade or indeed in any area of geo-economics or geo-politics. Its contradictory and ill-conceived home economic policies only add to the confusion. Is it reflating with repatriated funds and reduced taxation or deflating via increasing interest rates? And exactly what is the rational case for an ad hoc trade war with any willing takers? All of this is doubly debilitating in the absence of any long term strategy.
Meanwhile the EU is mistakenly unwinding its stimulus, which had been the cement in the otherwise loose bricks that made up the economic bloc of its 28 very disparate member nations.
So do not be surprised by Russia convening a friendly get together with the leaders of Europe in St Petersburg, of its increasing pressure on those states besides its border, or its insistent meddling in European elections. And look carefully at the leading indicators – the sharp decline in the Italian and Spanish stock markets and the increase in the extra cost of debt compared to Germany as seen in the rising yield spread.
We are the point when absent solid world leadership confidence is waning, the rotten geo-economic and geo-political foundations are starting to come apart — we may be at the tipping point and it will start in Europe.