Bureaucracies, Debt Threaten Europe’s Future

Solution is to let market forces work, not increase regulation
September 10, 2018 Updated: September 10, 2018

After World War I and World War II, Europe was divided and lay in ashes. Central Europe was subjected to Soviet rule behind the Iron Curtain, while Western Europe held out under the protection of the United States. France and the United Kingdom were part of the Allied Powers, which won the wars. However, they lost their role as global players and had to dissolve their Colonial empires.

Then followed a European miracle, strongly based on the close realignment and newly forged friendship between France and Germany. This led to the European integration process (the creation of the European Union) and the European Economic Community. The resulting single market was a huge success, and Europe emerged as a global economic power to be reckoned with.

With the collapse of the Soviet empire, the European Union was further strengthened by the accession of new members from the Baltic region and Central and Southeast Europe.

Overregulation Stifles Europe

Over the past 30 years, however, the world’s economic center of gravity started to move from the North Atlantic to the Pacific. While European countries still enjoy a technological lead in a number of sectors, their economies have been hobbled by overregulation, bloated welfare states, and protectionist measures, which were mainly introduced under the pretext of protecting consumers and leveling internal competition through “harmonization.”

Europe’s oversized bureaucracies and staggering sovereign debt threaten to strangle its market economies, destroying prosperity, undermining property rights and leading to the collapse of unsustainable social security systems.

Besides imperiling their own financial security, European powers also neglected defense—in part out of moral arrogance. They forgot that military strength can be an important factor in global competitiveness. As a result, Europe has remained in matters of security an American protectorate, and at best a junior partner to the United States.

Europe, US Need to Get Along

To stay competitive globally, Europe—though geographically part of Eurasia—needs a close partnership with the United States. A strong, prosperous, and soberly self-confident Europe would be a welcome asset on both sides of the North Atlantic. By leveling the geopolitical playing field, a stronger Europe would also be better positioned to improve relations with the East, especially with Russia.

It needed President Donald Trump’s “direct diplomacy” to issue an overdue wake-up call. Just recently, Emmanuel Macron, France’s president; Olaf Scholz, Germany’s finance minister; and Heiko Maas, Germany’s foreign minister, declared that Europe needs to get stronger. Unfortunately, these statements sounded more like expressions of defiance toward Washington than real declarations of intent. Specifics were noticeably lacking.

Macron’s calls for more self-reliance on defense and Scholz’s advocacy of mergers to improve the efficiency of defense production and procurement make sense. One hopes that implementation will follow, bearing in mind that a planned merger of Airbus and BAE Systems defense units was aborted by European governments just a few years ago.

Maas is promoting the development of a European financial clearing system independent of the Society for Worldwide Interbank Financial Telecommunication. Competition in this area would certainly be beneficial. Still, Maas’s reasoning is faulty, since it starts not with economic efficiency but with a desire to break free from the United States.

European policymakers are right to worry that their continent lags behind the United States and China in digital technology and artificial intelligence. However, the solution is not more government programs, but letting market forces work. European overregulation is the stumbling block.

We can be happy if Berlin and Paris work together effectively to promote European interests. However, if this cooperation is driven by opposition to the United States and brings more statism, instead of Europe’s defining principles and strengths of diversity, regional competition, and subsidiarity, it would be disastrous.

Prince Michael of Liechtenstein is the chairman of trust company Industrie- und Finanzkontor Ets. as well as the founder and chairman of Geopolitical Intelligence Services. This article was first published by GIS Reports Online

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.