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| Excerpted by SUMPURA Management Consultancy from Startfor |
Taken as a single geographic entity, Europe has the largest economy in the world. Should it choose to do so, it could become a military rival to the United States. Europe is one of the pillars of the global system, and what happens to Europe is going to define how the world works and in 2013 we will begin to get clarity on the future of Europe. The question is whether the European Union will stabilize itself, stop its fragmentation and begin preparing for more integration and expansion. Alternatively, the tensions could intensify within the European Union, the institutions could further lose legitimacy and its component states could increase the pace with which they pursue their own policies, both domestic and foreign.
It has been more than four years since the crisis of 2008 generated a sovereign debt and banking crisis that has turned to an economic crisis in Europe, moving into recession and unemployment across the Continent. If you divide EU into three parts based on unemployment: 1) five EU states significantly below the US rate of unemployment (Austria, Luxembourg, Germany, Netherlands and Malta) 2) seven countries with unemployment around the U.S. rate of 7.7% (Romania, Czech Republic, Belgium, Denmark, Finland, the United Kingdom and Sweden), and 3) remaining 15 states are above U.S. unemployment levels; 11 have unemployment rates between 10 and 17 percent, incl France (10.7%), Italy (11.1%), Ireland (14.7%) and Portugal (16.3%). Two others are staggeringly higher -- Greece at 25.4% and Spain at 26.2%. These levels are close to the unemployment rate in the United States at the height of the Great Depression.
Bear in mind that the unemployment rate goes up for younger workers. In Italy, Portugal, Spain and Greece, more than a third of the workforce under 25 is reportedly unemployed. It will take a generation to bring the rate down to an acceptable level in Spain and Greece. Even for countries that remain at about 10 percent for an extended period of time, the length of time will be substantial, and Europe is still in a recession. It also creates unrooted young people full of energy and anger. Unemployment is a root of anti-state movements on the left and the right. The extended and hopelessly unemployed have little to lose and think they have something to gain by destabilizing the state. It is hard to quantify what level of unemployment breeds that sort of unrest, but there is no doubt that Spain and Greece are in that zone and that others might be. Full enormity of EU’s unemployment situation has not yet sunk in, nor the fact that this kind of unemployment problem is not fixed quickly. It is deeply structural. The U.S. unemployment rate during the Great Depression was mitigated to a limited degree by the New Deal but required the restructuring of World War II to really address.
The European Union has been so focused on the financial crisis that it is not clear to me that the unemployment reality has reached Europe's officials and bureaucrats, partly because of a growing split in the worldview of the European elites and those whose experience of Europe has turned bitter. Partly, it has been caused by the fact of geography. The countries with low unemployment tend to be in Northern Europe, which is the heart of the European Union, while those with catastrophically high unemployment are on the periphery. It is easy to ignore things far away. Fabric of EU is not old enough, worn enough or tough enough to face the challenges. And since the core promise of the European Union was prosperity, the failure to deliver that prosperity -- and the delivery of poverty instead, unevenly distributed -- is not sustainable. If Europe is in crisis, the world's largest economy is in crisis, political as well as financial. And that matters to the world perhaps more than anything else.
This is why 2013 is a critical year for Europe, and for the world.
It has been more than four years since the crisis of 2008 generated a sovereign debt and banking crisis that has turned to an economic crisis in Europe, moving into recession and unemployment across the Continent. If you divide EU into three parts based on unemployment: 1) five EU states significantly below the US rate of unemployment (Austria, Luxembourg, Germany, Netherlands and Malta) 2) seven countries with unemployment around the U.S. rate of 7.7% (Romania, Czech Republic, Belgium, Denmark, Finland, the United Kingdom and Sweden), and 3) remaining 15 states are above U.S. unemployment levels; 11 have unemployment rates between 10 and 17 percent, incl France (10.7%), Italy (11.1%), Ireland (14.7%) and Portugal (16.3%). Two others are staggeringly higher -- Greece at 25.4% and Spain at 26.2%. These levels are close to the unemployment rate in the United States at the height of the Great Depression.
Bear in mind that the unemployment rate goes up for younger workers. In Italy, Portugal, Spain and Greece, more than a third of the workforce under 25 is reportedly unemployed. It will take a generation to bring the rate down to an acceptable level in Spain and Greece. Even for countries that remain at about 10 percent for an extended period of time, the length of time will be substantial, and Europe is still in a recession. It also creates unrooted young people full of energy and anger. Unemployment is a root of anti-state movements on the left and the right. The extended and hopelessly unemployed have little to lose and think they have something to gain by destabilizing the state. It is hard to quantify what level of unemployment breeds that sort of unrest, but there is no doubt that Spain and Greece are in that zone and that others might be. Full enormity of EU’s unemployment situation has not yet sunk in, nor the fact that this kind of unemployment problem is not fixed quickly. It is deeply structural. The U.S. unemployment rate during the Great Depression was mitigated to a limited degree by the New Deal but required the restructuring of World War II to really address.
The European Union has been so focused on the financial crisis that it is not clear to me that the unemployment reality has reached Europe's officials and bureaucrats, partly because of a growing split in the worldview of the European elites and those whose experience of Europe has turned bitter. Partly, it has been caused by the fact of geography. The countries with low unemployment tend to be in Northern Europe, which is the heart of the European Union, while those with catastrophically high unemployment are on the periphery. It is easy to ignore things far away. Fabric of EU is not old enough, worn enough or tough enough to face the challenges. And since the core promise of the European Union was prosperity, the failure to deliver that prosperity -- and the delivery of poverty instead, unevenly distributed -- is not sustainable. If Europe is in crisis, the world's largest economy is in crisis, political as well as financial. And that matters to the world perhaps more than anything else.
This is why 2013 is a critical year for Europe, and for the world.
(Excerpted by SUMPURA from Startfor http://www.stratfor.com/
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