2017 – make or break for the EU?

The strong UK economic performance in the second half of 2016 defied the gloomy predictions of many economists. Nevertheless, these same people are determined to tell us that Brexit will result in economic problems in 2017 instead. According to a number of economists surveyed by the Financial Times, growth will slow markedly during the year. Well, we shall see. The fall in sterling will almost certainly cause a rise in inflation, but worst case estimates put the annual Comsumer Price Inflation figure at something between 2-4%, which in recent historical terms is not that high, albeit not terribly good news for consumers.

In spite of Brexit, however, it is events in a number of the other 27 countries of the EU which are likely to cause far more concern during the course of 2017. While the Eurozone economy is recovering, it is still not strong enough to manage without the Quantitative Easing programme which the European Central bank began in early 2015. Italy in particular is looking very wobbly. It is estimated that 18% of all loans made by its banks are “non-performing” – in other words, are highly unlikely ever to be repaid.  These amount to a staggering €360 billion in total.

Furthermore, outweighing the economic concerns is the political scene. This year will see general elections in France, Germany, the Netherlands and the Czech Republic and possibly Italy. The likelihood of parties from outside the “mainstream” making significant gains or even ending up in power has been widely reported (See for instance here and here.)   Indeed, Mark Blyth, an academic based at Brown University in the USA, has predicted has predicted that the EU will cease to exist by the end of this year.

As James Forsyth wrote in the Spectator article mentioned above, however, “The British, it is said, always underestimate the sheer political determination to keep the European project moving forward.” Perhaps he has a point. Many of us who campaigned for Brexit regard the whole EU project as at best misguided and at worst, simply daft. Both during referendum debates and in articles for this website, I have publicly declared “I wouldn’t wish EU membership on my worst enemy”, but is this a sentiment confined to a minority of people in one country which has never been that keen on the EU project anyway?

Certainly Angela Merkel in Germany still exhibits the determination of which Mr Forsyth speaks. She reiterated her belief in the European project only a couple of weeks ago. “We Germans should never be deceived into thinking that a happy future could ever lie in going it alone nationally”, she said in her New Year message.

Meanwhile the Slovak Prime Minister, Robert Fico (whose surname, out of interest, should be pronounced “Feet-so“) has urged member states to stop their “adventures” – in other words, holding referendums on domestic issues  – because they “pose a threat to the EU.”

What will we do if … there is a referendum in Italy on the euro and Italian citizens decide they don’t want the euro?” he asked. What indeed?

On the surface, it appears that Mr Fico is singing from the same songsheet as Frau Merkel, but scratch a bit deeper and it very apparent that the former Soviet bloc countries, while seemingly committed to the EU, have a rather different idea of the way forward. In Poland, for instance, Jaroslaw Kaczynski, the leader of the governing  Law & Justice Party, has called for a new EU treaty in the wake of Brexit which would stop, if not reverse, the flow of power from national parliaments to Brussels. “We need reforms which clearly define that the EU is an association of national states and that national states are the foundation,” he said.

These words are hardly in the spirit of the “Ever closer union” from which David Cameron sought to exempt the UK last year – and it needs to be remembered that this phrase goes right back to 1957. It features in the preamble to the Treaty of Rome which was the treaty which launched what has become the European Union. It is a foundational concept to the whole European project.

Kaczynski is often labelled “Eurosceptic” as is his Hungarian counterpart Viktor Orban. Whether or not this is an accurate label, there is no doubt that their vision of the EU is vastly different from that of the Western European leaders 20 or so years ago. Indeed, according to Martin Schulz, the outgoing president to the European Parliament, the attitude of these men has hamstrung the entire EU project:- “The generation of [Helmut] Kohl and [François] Mitterrand travelled to Brussels with the attitude that a strong Europe is in the interest of our country… The [Viktor] Orbán generation says ‘we have to defend the interests of our country against Europe’ – as if they were being attacked by Brussels.”

Schulz went on to defend both the €uro and the eastward enlargement of 2004, even though both have created enormous problems for the EU. The former has brought Greece to its knees and has given Italy a “lost decade” economically, the latter has brought in a group of nations whose outlook on life is very different from the mindset of Herr Schulz or his Chancellor and are none too keen to change.

It could be that Mr Forsyth is right and that, in spite of both the misery the Single Currency has caused to several Mediterranean nations and the opposition to multiculturalism, social liberalism and various other -isms in Eastern Europe, the EU will muddle through. On the other hand, throw into the mix the forthcoming General Elections and the fact that 2016 did not turn out as the “experts” predicted and  it would be a brave man who would bet his money on it.

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  1. WillReply

    Very astute commentary of a self-evident issue the pan-continental establishment has. Whilst many were taking the lack of primary attention given to Brexit and Britain at the EU conference as a sign that the intention was for Brussels to fleece the UK and leave it out to dry, it’s rather more complicated – they’ve got too much on their plate to focus on one issue. Perhaps that’s what’s motivating Theresa May to take such a hardline stance in her negotiations – end FMP or we’re out – because she knows the full cost of what that would entail on both sides of the Channel? I don’t support Marine Le Pen or the National Front, and would vote for Fillon & the Republicans if I were a French voter, but the politico in me is almost wanting to see her win, if just to see the absolute wrecking ball that would strike mainstream Europe with. It’s self-evidently not going to happen, and my heart won’t be broken if it doesn’t, but it’s impossible not to wonder about the possibilities.

    I still think the European elections will see establishment returns, but with gains from Eurosceptic/nationalist opposition. CDU/CSU/SPD coalition in Germany with AfD as the opposition party. A very narrow result with a slight victory for The Democrats in Italy, but will be forced into coalition, leaving 5 Star Movement the Opposition, and probably continued strength from the Northern League. The French presidential election will probably be close run in the 1st round, it’ll certainly be Le Pen vs Fillon by round 2, but I’d imagine those Valls/Macron leaning voters will swallow their pride and vote Republican, although I don’t expect the 2007 styled blowout victory, probably within the regions of 60-40 for Fillon. As for the Netherlands, I have no clue how that will pan out. Here’s looking ahead!

  2. Gordon WebsterReply

    Really interesting view, though I think Mr Forsyth is right, that the EU will not give in without a big dirty fight. The EU was designed by France and Germany, to give them the power over Europe that Military Might could not achieve. Although, as Bernard Connolly suggests, that France have not been able to control Germany as they thought they could, their Elite are not yet disenchanted. Had Merkel not pushed the mass migration of millions of Arabs, Africans and Asians, the Eastern Europeans may still have been happy to take the Monetary Gains they get from EU Membership. The fact that nothing has changed and we, despite our vote, still have MEPs and are still subject to the whims of the Centrist Totalitarian Regime in Brussels, shows how hard they will fight to keep their power base.
    The question is, how many Politicians and Political Parties have received Bribes and “Soft Loans,” from Brussels and the ECB to “Promote The European Project.” We know that the BBC, TUC, Unite, The Guardian, and many other organisations have, so why not politicians.

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