New Eurozone Concerns Arise


A German economist is warning that another European financial crisis could be on the horizon. Dr Lars Feld, who sits on the German Council of Economic Experts, believes Italy could be ground zero for a new crisis at a time when the Eurozone is particularly vulnerable. Italy’s economy is shrinking at the same time it is dealing with government debt, and a banking crisis. A recession is all but guaranteed at this point, and the nation’s financial credibility is in question right now. In an interview with the British Broadcasting Company, Feld said “The banking system in Italy is not as safe as we might hope for. There is the potential for contagion, in particular, from the Italian banking system to other banking systems.”

Feld’s warnings are certainly not falling on deaf ears. Italy has been a concern for years, going back to the days following the 2008 global financial crisis. Unfortunately for Rome, and Brussels, no solution was ever put forward which effectively dealt with the Italian problem. As a result, Italian debt has skyrocketed while economic growth has been minimal at best.

EU intervention is not probable at this time. Brussels feels such a move could bring on a major financial meltdown across Europe. Italy is in the unique position of being too big to fail, yet simultaneously too big to save. To make matters more complicated, Rome and Brussels have been at a political standoff over Italy’s economic mess. The present Italian government is resisting EU oversight and this does not appear likely to change at any point soon.

Italy is not the only worry for the Eurozone. Germany’s economic expansion is slowing down immeasurably. The German government’s forecast for economic growth has been revised. Berlin now expects a grown of 0.5 percent, down from the 1.5 percent forecast earlier this year. Global competition has intensified, and Germany is responding slowly to the new challenges.

With EU parliamentary elections coming later this week, the economic concerns are sure to be on the minds of at least some voters when they go to the polls.

Thursday 30 November, 2017 Update: Merkel and the EU Both Remain in Limbo

Incontro dei leader dei paesi dell'euro zona

A quiet panic is materializing in Brussels right now as German Chancellor Angela Merkel remains unable to end Germany’s political deadlock and form a coalition. Every day that goes by with conditions remaining unchanged diminishes Merkel’s political power both at home and across Europe. To be frank, Germany appears to be growing weary of Merkel. In all likelihood she will head the new government when it forms. However, this has more to do with a lack of challengers facing her than it does her political acumen. In Brussels and beyond, a growing number of European Union officials, and their supporters are feeling as if the European project is caving in. The EU is at a pivotal moment in its history with the supranational body on the verge of enacting major reforms. But without Germany there to support and guide the EU through the uncharted territory, concern is turning to panic rapidly.

The European Union is facing a tumultuous period of uncertainty. Brexit, the nagging Eurozone crisis, a continent-wide lack of unity, and the rise of right wing populist politicians and governments have combined to challenge the EU like never before. Brussels had been counting on Merkel emerging from the September elections ready to lead the reform efforts. After all, Germany has been the guiding force behind the European Union for years whether EU officials care to admit it or not.  Those hopes have been dashed. Regardless of what happens in Berlin, Germany and its leader will emerge from this political crisis with its prestige and power bruised. For Germany, this issue will reverse itself eventually. For the EU, the bedrock that German support, and leadership is no longer a given.

In the wings is France and its leader Emanuel Macron. EU hopes for the future could very well be pinned on him, although he is no Angela Merkel, and France is not the economic, and political colossus that the Federal Republic of Germany is.  Something to be remembered in the coming weeks.



Embattled Europe: The Staggered EU


The European Union, as it stands in July of 2016, resembles a boxer entering the final round of a long, arduous championship fight. He is tired, unsteady, and has endured flurries of vicious blows to the body and head. He is still standing, yet it is unclear how much more punishment he will be able to endure. Brexit was a haymaker but will turn out to be the knockout blow? If the EU is going to emerge victorious it needs to make some late round adjustments or perhaps even adopt a new overall strategy.

Across Europe right now supporters of the European project are wondering if the EU will adapt to the emerging geopolitical realities on the continent and beyond. The question is not whether the EU can adapt. It is entirely capable of doing so. However, the political will to make the needed changes does not exist at the present time. A divide concerning the appropriate response to the British vote is widening across Europe. The Euro-Federalists and progressives, championed by Jean-Paul Juncker, the President of the European Commission, support using the Brexit negotiations as an instrument to solidify European integration while its opponents prefer to repatriate more power to national capitals and adopt a practical and realistic approach to Britain as it prepares to leave the EU.

Brexit, more than any other crisis, has shaken the EU to its core and spurred concerns about the future of the supranational body. Juncker and other supporters of a more federal Europe are deeply worried that Brexit could halt or reverse EU integration. The economic, political and social integration of European states is the raison d’être of the European Union, in their view. A stronger push for a deeper assimilation now will reduce the likelihood of future exits from the EU. The ties that bind Europe together are stronger than those that would tear them apart.

Opponents to Juncker’s ideas of deeper integration cite Brexit as a prime example of integration gone bad. Britons were not opposed to the concept of the European Union per se. The majority of Britons voted to leave the EU in large part because they viewed integration as eroding their national sovereignty. In short, Britons want control of their borders, immigration and economic policies and such to rest with London and not Brussels.

The issues at the heart of the Brexit argument are fueling a wave of populist movements and Euroskeptic sentiment across the continent. We’ve discussed it on this blog quite often. A European government is perfect in theory. In reality, on the other hand, it has been a decrepit instrument. The lack of effective EU leadership has weakened Europe while simultaneously undermining the body’s institutions and mandates. Public confidence in the EU has fallen drastically in the largest European nations. Tension has always existed between those who want a more integrated union and those who want safeguards in place to protect national sovereignty, however, now that the deficiencies of the EU have been laid bare and a sovereign nation has opted to leave, the stakes have become far greater.

Europe cannot travel down two roads simultaneously. Even though many EU officials and politicians prefer the integration pathway, it is becoming clear that a sizeable fraction of Europe’s citizens are leaning towards a road where the EU has the role of an intergovernmental agency that does not encroach on national sovereignty. Regrettably, the two positions are so divergent there is little chance of a compromise. Europe’s continuing crisis of representation is only one factor preventing collective action by the European Union. High unemployment, sluggish economic growth, uneven development, and welfare-state retrenchment all hold varying degrees of responsibility for the situation the EU is in at present.

The writing is on the wall. Unless the EU can maneuver the dangerous waters it is currently in, the results will not be favorable for the prospects of a united continent. Until EU leadership acknowledges the problems facing it and comes up with solid, realistic solutions there is no reason to believe that the EU’s standing will improve at any point in the foreseeable future.



The July 2016 DIRT Project: Embattled Europe


As we march towards the midway point of 2016 it is quite clear that the past six months have been an arduous time for Europe. The heavy worldwide media coverage of Brexit over the last week revealed to many across the globe that Europe is an embattled continent. Sovereign nations, and supranational organizations alike are facing four major challenges that threaten to alter the face of Europe for decades if left unanswered. Thus far, neither the EU, NATO, sovereign nations, or a combination of the three have been successful in coming up with solutions. The failure to find solutions is beginning to produce adverse consequences, as we saw this past week with Great Britain voting to leave the EU.

In July, Today’s DIRT will analyze the four major challenges facing Europe right now, as well as the European responses to each. As far as IR and defense matters go, Europe is where it is at right now. Consider it an IR and defense smorgasbord. There is something for everyone. All of the issues are interconnected to one degree or another.  The series will be divided into four parts and cover the topics listed below.

The European Union– Anti-EU sentiment was running high even before Brexit. Right now there are fears that it will go viral across the continent and separate more nations from the EU. The European Union is at a crossroads.

Russia– Europe has not responded effectively to Russia’s return to the world stage. Eastern Europe is becoming a powder keg and Putin has not been effectively deterred from veering Russia away from the course it is on at the moment.

Terrorism– The Brussels and Paris attacks revealed that Europe has become something of a free fire zone for ISIS and other radical Islamic groups. Progress in bolstering security has been made, however, it is unclear is Europe is doing enough to keep its citizens safe.

Immigration/Refugees– Brexit came about it large part because of the EU’s erratic response to the surge of refugees that have been coming from the Middle East and Africa. The recent spike in terrorist attacks is also linked definitively to the Immigration issue.


Monday June 13, 2015 Update: Rescue Plan For Greece Agreed Upon


Following a marathon 17 hour session that dragged on into the early morning hours, Eurozone leaders finally agreed on the terms for a third bailout for Greece. With the prospect of a ‘Grexit’ looming over their heads, European leaders negotiated the terms of the third bailout deal and they were accepted by Greek Prime Minister Alexis Tsipras. He will now have to get key measures of the deal passed through parliament. That process will not easy. The terms of the third deal are not as generous as the ones included in the deal that Greek voters turned down in last week’s referendum. In fact, the reaction of many in Greece to the harsh terms has been one of anger and humiliation. Tsipras was elected in January on a platform of rolling back austerity measures. His dangerous game of brinkmanship took Greece to the edge of the abyss and some European leaders, especially Angela Merkel, called his bluff. Tsipras was forced to go to Brussels this weekend with hat in hand and beg for a third bailout without any room to maneuver.

The full text of the agreement can be found here:

Despite Monday morning’s sense of relief, the deal is not complete just yet. The prospect of a ‘Grexit’ has not disappeared entirely. As I stated above, Tsipras still has to get approval from parliament. By all appearances, Tsipras is going to be faced with at least some political opposition. It remains unclear if this will force him to call for new elections in the coming months, however, the possibility is real. In the meantime, he has to convince the voters that this is a negotiated settlement and not a surrender of Greek sovereignty.

The crisis is not yet over, however, if parliament agrees to the terms of the deal, the light at the end of the tunnel will be much closer than it has been at any point in the last thirty days.