Stratfor.com: The Divided States of Europe
By: Marko Papic, Stratfor.comJune 28, 2011
Europe continues to be engulfed by economic crisis. The global focus returns to Athens on June 28 as Greek parliamentarians debate austerity measures imposed on them by eurozone partners. If the Greeks vote down these measures, Athens will not receive its second bailout, which could create an even worse crisis in Europe and the world.

It is important to understand that the crisis is not fundamentally about Greece or even about the indebtedness of the entire currency bloc. After all, Greece represents only 2.5 percent of the eurozone's gross domestic product (GDP), and the bloc's fiscal numbers are not that bad when looked at in the aggregate. Its overall deficit and debt figures are in a better shape than those of the United States-the U.S. budget deficit stood at 10.6 percent of GDP in 2010, compared to 6.4 percent for the European Union-yet the focus continues to be on Europe.

That is because the real crisis is the more fundamental question of how the European continent is to be ruled in the 21st century. Europe has emerged from its subservience during the Cold War, when it was the geopolitical chessboard for the Soviet Union and the United States. It won its independence by default as the superpowers retreated: Russia withdrawing to its Soviet sphere of influence and the United States switching its focus to the Middle East after 9/11. Since the 1990s, Europe has dabbled with institutional reform but has left the fundamental question of political integration off the table, even as it integrated economically. This is ultimately the source of the current sovereign debt crisis, the lack of political oversight over economic integration gone wrong.

The eurozone's economic crisis brought this question of Europe's political fate into focus, but it is a recurring issue. Roughly every 100 years, Europe confronts this dilemma. The Continent suffers from overpopulation-of nations, not people. Europe has the largest concentration of independent nation-states per square foot than any other continent. While Africa is larger and has more countries, no continent has as many rich and relatively powerful countries as Europe does. This is because, geographically, the Continent is riddled with features that prevent the formation of a single political entity. Mountain ranges, peninsulas and islands limit the ability of large powers to dominate or conquer the smaller ones. No single river forms a unifying river valley that can dominate the rest of the Continent. The Danube comes close, but it drains into the practically landlocked Black Sea, the only exit from which is another practically landlocked sea, the Mediterranean. This limits Europe's ability to produce an independent entity capable of global power projection.

However, Europe does have plenty of rivers, convenient transportation routes and well-sheltered harbors. This allows for capital generation at a number of points on the Continent, such as Vienna, Paris, London, Frankfurt, Rotterdam, Milan, Turin and Hamburg. Thus, while large armies have trouble physically pushing through the Continent and subverting various nations under one rule, ideas, capital, goods and services do not. This makes Europe rich (the Continent has at least the equivalent GDP of the United States, and it could be larger depending how one calculates it).

What makes Europe rich, however, also makes it fragmented. The current political and security architectures of Europe-the EU and NATO-were encouraged by the United States in order to unify the Continent so that it could present a somewhat united front against the Soviet Union. They did not grow organically out of the Continent. This is a problem because Moscow is no longer a threat for all European countries, Germany and France see Russia as a business partner and European states are facing their first true challenge to Continental governance, with fragmentation and suspicion returning in full force. Closer unification and the creation of some sort of United States of Europe seems like the obvious solution to the problems posed by the eurozone sovereign debt crisis-although the eurozone's problems are many and not easily solved just by integration, and Europe's geography and history favor fragmentation.

Confederation of Europe
The European Union is a confederation of states that outsources day-to-day management of many policy spheres to a bureaucratic arm (the European Commission) and monetary policy to the European Central Bank. The important policy issues, such as defense, foreign policy and taxation, remain the sole prerogatives of the states. The states still meet in various formats to deal with these problems. Solutions to the Greek, Irish and Portuguese fiscal problems are agreed upon by all eurozone states on an ad hoc basis, as is participation in the Libyan military campaign within the context of the European Union. Every important decision requires that the states meet and reach a mutually acceptable solution, often producing non-optimal outcomes that are products of compromise.

The best analogy for the contemporary European Union is found not in European history but in American history. This is the period between the successful Revolutionary War in 1783 and the ratification of the U.S. Constitution in 1788. Within that five-year period, the United States was governed by a set of laws drawn up in the Articles of the Confederation. The country had no executive, no government, no real army and no foreign policy. States retained their own armies and many had minor coastal navies. They conducted foreign and trade policy independent of the wishes of the Continental Congress, a supranational body that had less power than even the European Parliament of today (this despite Article VI of the Articles of Confederation, which stipulated that states would not be able to conduct independent foreign policy without the consent of Congress). Congress was supposed to raise funds from the states to fund such things as a Continental Army, pay benefits to the veterans of the Revolutionary War and pay back loans that European powers gave Americans during the war against the British. States, however, refused to give Congress money, and there was nothing anybody could do about it. Congress was forced to print money, causing the Confederation's currency to become worthless.

With such a loose confederation set-up, the costs of the Revolutionary War were ultimately unbearable for the fledgling nation. The reality of the international system, which pitted the new nation against aggressive European powers looking to subvert America's independence, soon engulfed the ideals of states' independence and limited government. Social, economic and security burdens proved too great for individual states to contain and a powerless Congress to address.

Stratfor is a private intelligence company delivering in-depth analysis, assessments and forecasts on global geopolitical, economic, security and public policy issues. A variety of subscription-based access, free intelligence reports and confidential consulting are available for individuals and corporations.

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