The birth of a new Europe
Germans began voting in a national election today that is likely to see Chancellor Angela Merkel win a historic fourth term and a far-right party enter parliament for the first time in more than half a century.
Merkel’s conservative bloc is on track to remain the largest group in parliament, opinion polls indicated, but a fracturing of the political landscape may well make it harder for her to form a ruling coalition than previously.
With as many as a third of Germans undecided in the run-up to the election, Merkel and her main rival, centre-left challenger Martin Schulz of the Social Democrats (SPD), urged them on Saturday to get out and vote.
In regional votes last year, Merkel’s conservatives suffered setbacks to the hard-right Alternative for Germany (AfD), which profited from resentment at her 2015 decision to leave German borders open to over one million migrants.
Those setbacks made Merkel, a pastor’s daughter who grew up in Communist East Germany, wonder if she should even run for re-election.
But with the migrant issue under control this year, she has bounced back and thrown herself into a punishing campaign schedule, presenting herself as an anchor of stability in an uncertain world.
Visibly happier, Merkel campaigned with renewed conviction: a resolve to re-tool the economy for the digital age, to head off future migrant crises, to defend a Western order shaken by Donald Trump’s U.S. election victory last November and to build a new Europe with French President Macron and without the UK.
Her quasi-certain election today will mark the end of a long road to the emergence of a New Europe that almost saw the break-up of Europe.
This 7 years process started with the German elections that were held on May 9th 2010 and almost cost Merkel her majority in the Bundesrat.
The North Rhine-Westphalia state election, 2010, was an election held on May 9, 2010, to elect members to the Landtag (state legislature) of the German state of North Rhine-Westphalia. The incumbent government at the election was the Christian Democrat (CDU)–FDP administration of Minister-President Jürgen Rüttgers. The biggest opposition party was the Social Democratic Party, led by Hannelore Kraft since 2005.
As the election was held in Germany’s most populous state, it was seen as a test of the federal government’s performance after seven months in office. The federal government, also a CDU-FDP coalition, was accused of being indecisive as the two coalition partners had different aims.
As the Bundesrat (upper house) is made up of representatives from the states, the federal government risked losing its narrow majority in that house.
Had Merkel lost her majority there, the entire policies of Germany would have been different and the financial markets went into huge volatility in the days before and the days after these landmark elections.
The European Union and the EURO which was implemented in 2000 has been a great integration success for Europe. It created a sense of common identity, allowed entire generations of young europeans to feel Europeans as much as they felt nationals of their own countries and attracted 27 countries into common goals, common standards, harmonized laws and open borders.
On the other hand, the European political construction was never achieved.
It remained a Europe of Nations at the political level and only pursued integration at the monetary level through the adoption of the common currency.
Europe has no President, no Federal Budgetary and taxation powers, no unified foreign policy and no unified armed forces, even if cooperation on all levels is extremely strong and efficient.
But its flaws were revealed in the open during the Ukrainian crisis of 2014 and the annexion of Crimea and Eastern Ukraine by Russia, the first time since Yalta a country changes internationally recognized boarders by force.
Europe stood powerless. No European army came in two defend Ukraine and Crimea or to force a negotiation with Putin’s Russia, despite the vast majority of the Ukrainian population wanting to join Europe, the very cause of the crisis from the beginning.
Europe is seen by most of the European population as a powerless, cumbersome and expensive administration, self-feeding on its prerogatives.
Anti-European sentiment grew sharply during the 2008 financial crisis, and BREXIT was a testimony of that anti-european sentiment. It is not a surprise and we predicted the outcome as early as in February 2016 and that the British people would vote for the exits.
The UK, contrary to most continental European countries, have had an evolutionary political system for a 1000 years while Europe was prey to wars, revolutions, the fall of empires, royalties, the emergence of democracies, the formation of nations France in 1500, Italy in the 19th century and the Nordic states.
Contrary to continental Europe, the UK is the only territory of Northern and Central Europe that has never been invaded for 1000 years, and even the first and the second world wars did not see foreign troops on UK soil thanks to being them being the only islands in the continent. Even Ireland was divided by wars up until the 1970's.
As a result, the British identity is an old and heavily entrenched sentiment in the UK.
The British Empire has been ruling the world for two centuries and the concept of this identity and this history merging and blending into a European identity and a unified political entity was unplayable, unconsciously, to generations of Brits.
The UK always saw Europe as a common trading place, a global unified market for goods, services and people, never a political construction and they were one the main roadblock to more European integration.
BREXIT was the best thing that could happen for a new and more integrated Europe, and it did happen.
Fears remained at the beginning of 2017 about the anti-european populist sentiment in continental Europe and the elections is the Netherlands and in France, in particular, were a litmus test for the continuation of European integration.
With clear anti-european agendas and calls for the re-negotaitions of the Treaties and of the Unique currency, a victory of the populists factions would have had devastating consequences for the future of an integrated political Europe.
Fortunately, but also because the benefits of Europe in terms of peace and harmony are much more obvious to the continental European populations after centuries of European war, the peoples of Europe voted clearly in favor of Europe and President Macron was elected in France with a clear agenda for a stronger and more federative Europe. The same happened in the Netherlands.
Angela’s Merkel humanist pro-immigration policies left residual risks. A defeat of Angela Merkel could spell trouble for her strongly pro-european agenda.
Her victory will open the door to a new effort to build a more coherent, more unified and more functional Europe.
Indeed Europe needs to be reformed and become a true global power in front of a declining USA and a rising China.
What is at stake is a tri-polar world, a balancing act between two powers that are naturally brought to confrontation as can be seen in the current North Korea crisis which is nothing but a loss of might for the USA in Asia and the ascertaining of China as the political and military leader of the Asia-Pacific region.
The US$ 12 trillion Euro economy is a balancing act in front of the US 18.5 trillion and China rapidly rising 11 trillion mights.
Russia is not even in the equation with its 1.3 trillion economy, ranking # 13 behind South Korea and Canada. Ultimately, Russia does not have the economic and financial means to remain a global military super power in the future, a role inherited from the second world war that it tries to showcase to its population in the Middle East for internal political reasons, but with no realistic future…
To create this balanced tri-polar political, military and economic world, Europe needs to integrate further. Angela Merkel and Emmanuel Macron understand that full well.
Europe was an unfinished construction.. it needs to be completed.
Economically, the creation of the Unique Currency and of the European Central Bank dealt with the monetary aspects of things and led to tremendous progresses in Southern Europe, Italy, Spain, Portugal, Ireland and even Greece.
But the lack of Federal budgetary powers, the inability to raise taxes at the European level, to create a European balance sheet, and to force political reforms left Europe like a car with two drivers, and even more….
One handling the accelerator, the European Central bank which controls the unified monetary policy, accelerating when needed, as is the case now and controlling inflation as it cans….
And 27 drivers holding the Brakes, the budgetary and tax levying powers, implementing local policies without coherence and that have left Europe with tremendous divergences in Labor Laws, budget deficits, stocks of public debt, taxation regimes, tax collection and ultimately, completely different labor markets and unemployment rates…..
From the military standpoint, the absence of a European military force and police forces showed its weakness in the handling of the immigrant’s crisis in 2015, allowing millions of migrants from the Middle East to enter Shengen’s Europe because the control of the borders was the responsibility of each individual country.
It led to massive intraeuropean migration as well, one of the reasons Britons voted for the Exit, and created a significant cultural threat to the essentially a culturally Christian Europe.
Europe’s inability to deal with Russia during the Ukrainian crisis also showed the limits of its political might. It had no alternative but to resort to NATO, an essentially American-led international force inherited from the second world war and the subsequent cold war, detained to counter the USSR militarily and with interests that differ from the European interest as can be seen with the presence of Turkey in NATO.
A New Europe is in the process of being born and we expect this issue to come high on the agenda as soon as Angela’s MERKEl election is secured.
A push towards a more federal Europe, its own budget, taxation power, redistribution rules, unified armed forces, unified police forces, more unified labor laws and more synchronized economic, labor markets and public finances…
A more federal Europe, with a Government with real powers on foreign affairs, military affairs, defense and taxation.
Does that mean a structurally stronger EUR ahead ?
Thai is why the currency markets are telling us right now. The rally in the EURO against all currencies since the election of Emmanuel MACRON indicate that the global psychology of the markets has embraced the idea…
However, the road to the implementation of their new and strong Europe will be long, very long…
It will be marked with major political battles and referendums, doubts, steps forward and steps backward…
And in the mean time, the currency markets will come back to the fundamentals of interest rate differentials, and in particular, real interest rate differentials, And on that front, economic history and economic theory tells us that the USA will have positive real interest rates and higher nominal interest rates than Europe very soon…
So don’t get carried away with the EURO right now, but the future of Europe looks good !
Very Good !
Thank you Great Britain, Thank you Macron, Thank you Merkel.
You are paving the way for a better word future..
