The EU: R.I.P. 1993-2018

The idea of Europe had its origins in the post World War-II situation when some countries felt the need for peace and deeper cooperation. French Foreign Minister Robert Schuman presented a plan for deeper cooperation in 1950. This was essentially for control of steel and coal industries on a common basis to regulate the production of weapons. Based on the Schuman plan, six countries--Germany, France, Italy, the Netherlands, Belgium and Luxembourg--signed a treaty to run their heavy industries – coal and steel – under a common management. In this way, none can, on their own, make weapons to turn against the other, as in the past. In a sense, the European Union (EU) was created by the Maastricht Treaty on November 1, 1993. It was an economic union that framed policies on economies and laws and to some extent, security. The EU soon expanded and there was clamour among many erstwhile Communist states to join. Romania and Bulgaria joined in 2007. There was an understanding about fiscal measures—that deficit will not exceed 3 per cent of the GDP and debt will be within 60 per cent of GDP. Many countries like Italy and Greece fudged numbers and this could not be enforced. The EU created a single currency, a monetary union, but not a fiscal union. It is like India having a common currency but each state having any level of debt and deficit. This was not, obviously, sustainable.

The European economic and social crisis is becoming worse with each passing day. One business channel asked me in 2008 how long it might take to recover and I responded saying 40 quarters. But now I forecast it may never recover. Europe is facing three types of crisis – economic, demographic, and civilisational and it is not in a position to come out of these. All three are not recent ones; they were developing over a period and are now culminating into a catastrophe. The debt-to-GDP ratio of most of Europe is at unsustainable levels with Britain’s above 500. There are three major constituents of debt — government debt, corporate debt and household debt. Of the three, household debt has reached nearly 80 -100 per cent of GDP in many countries. The reason is simple — unlike India, households in Europe and USA have forgotten one simple word — savings. They live on debt and are interned by debt. The root cause is the attempt in Europe to nationalise families and privatise business. Old age, health, childcare are all normal family activities taken over by the state and the state is broke. Due to low population growth,  funded security schemes are facing a crisis since not enough numbers are entering the workforce, and unfunded security systems are in difficulty since taxes are not adequate.

The situation is made worse by unemployment. Youth unemployment has reached 50 per cent in Spain and hovering around 30 to 40 per cent in many others. The overall unemployment is at more than 25 per cent in most countries and creating social turmoil. Then there is the demographic crisis. The population of Europe during the First World War was nearly 25 per cent of world population. Today it is around 11 per cent and is expected to become 3 per cent in 20 years. In some countries, fertility rates are as low as 1 when 2.1 is considered as replacement rate. Europe will disappear from the world map unless migrants from Africa and Asia take over. That is why Europe is being referred to as Eurobia and London as Londonistan.

Then there is the crisis of civilisation in Europe. It has renounced the Church and has become secular. Church attendance has fallen significantly and churches have become tourist attractions rather than places of worship. Most migrants, particularly those doing works like garbage removal, cleaning plates in restaurants, porters, and grape-pickers hail from Mauritania, Syria, Somalia or Algeria and most are Muslims. Due to high unemployment, there is resentment against migrants and this is turning into anger against Muslims. Nearly 10,000 people attempt to enter Europe every day and one million refugees are waiting to enter Europe. A recent poll in Netherland boosted Wilders, the anti-immigrant, anti-EU, anti-Islam party, which became the second largest. In France, Marine Le Pen—who is anti EU and anti-immigration—may gain ground. If Le Pen wins, the EU’s demise will be faster. Hungary,Austria and Poland are in queue. BREXIT is the beginning. The European Union is unsustainable and dead. Long live the EU.

The author is Cho S Ramaswamy Visiting Chair Professor of Public Policy at Sastra University. Views are personal.