Dan Liljenquist: Despite Peace Prize, tensions boiling in Europe
Last year, the Norwegian Nobel Committee awarded the Nobel Peace Prize to the European Union "for over six decades [having] contributed to the advancement of peace and reconciliation, democracy and human rights in Europe." The decision praised France and Germany, traditional enemies who had fought three wars in a 70-year period, for their close collaboration, stating, "Today, war between Germany and France is unthinkable."
I am not sure the Nobel Committee would be as quick with its praise today.
Europe is in a full-blown economic crisis, with high unemployment, huge entitlement programs and massive sovereign debt. Germany is the one economic bright spot in the European Union, and the German citizens have generously extended credit to other European countries over the last several years. But in the absence of meaningful financial reforms, Germans have reached the limits of their generosity. Germany is insisting that the other Eurozone countries live within their means. The battle for the economic future of Europe is underway, and I am rooting for Germany.
A few days ago, President Francois Hollande's French Socialist party released a 21-page report blasting Germany's leaders for demanding that other EU countries control their sovereign debt. The report blamed the economic problems of Europe on "the selfish intransigence of Chancellor Merkel, who thinks only of German depositors, Berlin's trade balance and her electoral future." The French newspaper Le Figaro ran with the headline "The Socialist Party declares war on Germany."
I am not surprised that the French Socialists have trained their rhetoric on Germany. Hollande and his socialist allies swept into power by blaming France's economic woes on capitalism. Immediately after taking office, they targeted the "rich," raising income tax brackets for the top earners to 75 percent. Anyone who opposed these confiscatory taxes was ruthlessly attacked; the socialists got exactly what they wanted. Amazingly (at least to Hollande and his cronies), these policies drove up unemployment and made the economic climate even worse in France. Now with their approval ratings at record lows, the French Socialists have tagged Germany as their new scapegoat.
According to Hugo Brady of the Centre for European Reform, the relationship between France and Germany is at a post-war low. Germany wants Europe to be fiscally responsible and preserve the value of the Euro. France wants Europe to print more money to finance deficit spending and devalue the Euro. There is no real middle ground.
I can't fault Germany for sticking to its guns. Devaluing the Euro will harm the notoriously thrifty German citizens who work hard and save their Euros. German workers don't have a 35-hour workweek. German workers don't get five weeks of guaranteed paid vacation a year. Why should Germans be required to subsidize the French way of life? But that is exactly what the French Socialists are demanding.
Unfortunately for Germany and the stability of Europe, Spanish, Portuguese and Italian socialists are following France's lead. This week Spain dramatically reversed course on its austerity plan, violating its commitment to Eurozone regulators to reign in its sovereign debt. Italy and Portugal are contemplating similar moves. This will further isolate Germany from the rest of Europe.
Should France, Spain, Portugal and Italy force the European Union to retreat from its current policy of austerity in favor of quantitative easing, Germany will not take an assault on its economy and sovereignty lying down. Germans could choose to withdraw from the European Union altogether. If they do so, and the rest of Europe retaliates with economic sanctions, it could easily lead to war. This scenario has played out before to devastating effect.
Dan Liljenquist is a former state senator and U.S. Senate candidate.
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