EU’s Fate After Paris: A Dark Scenario

The terrorist attacks from Paris, inhuman and brutal, serve as an accelerant for already ongoing processes that have been weakening the European Union’s bonds.

Now they combine in a dangerous mixture and react with each other:

• The “third world war”, as labeled by the pope, with radical Islam, which is intensifying for years and in which peaceful solution seems more and more utopian.
• The wave of refugees flowing into Europe, trying to escape war, suppression and poverty.
• A depressing lack of cultural will for self-defense of the West, serving like an invitation to intolerant people to become even more intolerant.
• A European Union that shows more and more that it is not build on shared values but on the generation of economic gains and prosperity. Once Union stops being financially beneficial politicians come under pressure to explain the benefits to their national electorates.
• European governments not sticking to agreements and rules. Declaring themselves incapable of returning to the order of law.
• Governments and private sectors having lived beyond their financial means for years, unable to deal with the hefty debt load and unfunded promises for retirement and health care of an aging society.
• European leaders who have instead of addressing these issues and the ongoing Euro crisis heads on have played for time – without making use of this time.

All of this – and the list is not complete – is now mixing and reinforcing each other.

Covering the cost of counterterrorism wars

The war on terror, like all wars, will be expensive. Higher debt levels are the inevitable outcome. Adding to the pile of already too high debt.

As a debt restructuring becomes even more unlikely governments will return to the proven instrument of war financing: the printing press. The helicopter money already asked for before will come into action faster and more generously than previously thought.

The short-term effect will even be positive. The European economy might finally overcome its seven-year malaise. A specious prosperity, but prosperity. Helicopter money makes it also easier to deal with the exploding costs of dealing with the refugee crisis.

Refugee policy dis-integration and Brexit’s costs

On the other hand we will see more dis-integration. Already, before the Paris attacks, the other European countries only shake their heads in view of the German refugee policies.

Should the UK decide to leave the EU, it would be a decision reinforced by the refugee policies of Germany. An important voice of political sanity and economic freedom within the Union would be lost.

The remaining EU will be dominated by socialist views favoring a strong welfare state and redistribution. Europe would move clearly in the direction of becoming a milder version of the former East German state. Redistribution of wealth instead of generation of wealth would dominate politics.

But not only the UK will leave the union. If Brussels bureaucrats really start to “punish” countries for non-cooperation in the area of the refugees, it will be only a matter of time until other countries prefer to leave the union. Membership would no longer be seen as beneficial to the countries wellbeing.

The end of passport and currency union

The free movement within Europe – in the so-called Schengen area – is already history. Until now no one dares to say it publicly, but the failure of the EU to protect its borders will lead to a resurrection of border controls within Europe.

With this one of the most visible symbols of European unity will fall. And make it much easier for politicians to pursue national-level policies going forward.

This will also finalize the future of the Euro. Begun with the promise of supporting economic growth and welfare, it has turned out to be an economic straightjacket. It is suffocating the economies of the periphery, as well as France.

After seven years of economic stagnation an high unemployment, it is only a question of when – not if – a country decides to leave. Just look at the discussion going on in Finland these days.

Perhaps I am wrong and the governments of Europe will manage to avoid the worst. But I would not bet on it, and I would rather be prepared.