Stratfor - The Decade To Come

Europe Comes to a Crossroads

Summary

In the next decade Europe will face burning questions over the extent to which it can integrate, over whether one power will be forced into a leadership role and over whether the European experiment in integration will begin to fragment. The current trend in Europe is toward further integration through strengthening its existing institutions and extending membership to its Eastern neighbors. Less clear is whether or not Europe will be able to continue this process of economic and social integration without being forced to form a clear coherent political and security policy as well. Even less clear is whether or not Europe has the political will to allow these political and security policies to evolve, and whether or not its constituent countries will subordinate their sovereignty in order to achieve this unity.

Analysis

Europe has been the international system’s center of gravity for about 500 years. Atlantic Europe – Portugal, Spain, England, France and the Netherlands – conquered most of the world, creating the first single system of international relations. Until the European conquest, the world had consisted of sequestered, fragmented systems. Aztecs had nothing to do with the Chinese, who had nothing to do with Mali. The European conquest of the world not only created a single international system, but made Europe both the crossroads and arbiter of that system.

The single most important event in the past century, in our view, was the collapse of the European imperial system. The victim of its own interminable internal warfare, European civilization tore itself apart in the first half of the 20th century during its two wars. It emerged from those wars with neither the means nor the will to control its empire. The struggle for a world empire passed from their hands to two semi-European nations, the United States and the Soviet Union. The defeat of the Soviet Union by the United States in the Cold War, left the United States as the center of gravity of the international system. The United States was geographically at the center of the system, as both an Atlantic and Pacific power in an age in which trans-Pacific trade equaled trans-Atlantic trade. Militarily, economically and politically, the United States became the center of the international system as well.

Europe faces two questions in the next decade, and actually the next century. What will be its relationship to the overwhelming power of the United States? What will be the relationship of Europe to itself and to its immediate environment? Europe will grapple with both of these questions, which derive from a fundamental issue of how Europe ultimately responds to its loss of empire.

Germany as the Keystone

Europe confronted its loss in two stages. During the Cold War, it was effectively occupied by the United States and Soviet Union. Under the aegis of the occupying powers, both parts of Europe were pushed into multinational economic, political and military groupings, partly formal and partly informal. The Western bloc, the European Union, proved remarkably successful. The Eastern bloc, Comecon, proved amazingly unsuccessful. The collapse of the Soviet Union left Western Europe in a relatively prosperous and cohesive position. The fragmented regions of the Soviet empire were left in shambles.

One of the consequences of the Soviet Union's collapse was the reunification of Germany. German unification, at least for the past century, has signaled a coming war. In 1871, 1914 and 1939, wars broke out because of the geopolitical implications of a united Germany. A united Germany is an inherently fragile entity. Anchored in the south by the Alps and in the north by the North and Baltic seas, Germany is extremely vulnerable on an East-West axis. As soon as Germany united, it confronted the following fact: If a Western power, such as France, and an Eastern power, like Russia, were to simultaneously attack, Germany would find itself in an untenable situation.

This is not a problem when Germany is divided and vulnerable. Then, Germany lacks options. However, once Germany is united, this problem presents itself. Since it cannot survive a two-front war launched simultaneously, it adopts a diplomatic stratagem designed to keep the Western and Eastern powers apart. However, the very dynamism of a united Germany creates tremendous insecurity, in the end triggering the threat and even implementation of a multi-lateral coalition. Then, Germany has only two choices. The first is to fight a war, chosen by its enemies, that it cannot win. The second is to initiate war at a time of its choosing, in the hopes of decisively defeating one of its enemies and then intimidating or defeating the other.

The strategy worked in 1871 when Germany defeated France. It failed in 1914 when it could not defeat France or Russia and was forced into a two-front war. It failed in 1939 when it defeated France and then chose to attack the Soviet Union. The failure of these strategies does not necessarily mean they won't be tried again. It is important to bear in mind that German geography has a great deal to do with its strategy. Now, with Germany once again united, the fundamental question is whether German reunification will lead to another German war.

The first function of NATO and the EU was to strengthen Europe militarily and economically so that it could resist an attack or subversion from the East. Now these institutions have taken on a new role. After the Soviet Union's collapse and German unification, the fundamental mission of the EU and NATO is to create a system of prosperity and security in which German insecurity does not cause it to behave as it did previously. NATO's contemporary mission is to eliminate German fear of a war on two fronts.

NATO does this in two ways. First, by making France and the UK part of NATO, they become German allies. This eliminates the core of German insecurity. Second, in addition to geopolitical security, the EU is designed to increase European economic well-being. In particular, if it increases German well-being above what would be possible without the EU, Germany is given a second powerful motivation for cooperating with the rest of Europe, eliminating the major cause of European wars in the last century.

Thus, we are in a situation in which the defeats in World War I and World War II exhausted Europe and caused it to give up its empire. This eliminated the imperial competition that generated massive friction and competition during the 19th century, particularly outside of Europe. The end of the Cold War eliminated the threat of a confrontation between the United States and the Soviet Union on European soil. The continuation of NATO and the growth of the EU increase Germany's motivation to remain inside multilateral relationships. Therefore, it appears, on the surface at least, that the underlying causes of conflict have been eliminated in Europe.

There are, however, some serious questions that must be confronted in the next decade. The first is the willingness of NATO and Germany's European allies to place themselves at risk in defending Germany from a resurgent Russia. The second is the question of whether the EU will continue to benefit all European nations equally, or whether a point might come in which some countries, including Germany, might find it in their best interests to leave the EU. We do not expect these issues to come to a head in the next decade. We do, however, expect them to begin posing some serious challenges.

Europe's New Strategic Environment

Let us begin with the military question. It is our view that in Chechnya, Russia has drawn a line in the sand. It will not allow the disintegration of the Russian Federation no matter what the price. This is the first policy in years that has generated general popularity among Russians and indicates a widespread weariness with the loss of Russia's status in the world. Now, Chechnya cannot be defended solely in Chechnya. It requires Russian domination in Georgia.

The frontier in the Caucasus between Russia and Turkey was not arbitrarily drawn. It represented a logical demarcation between the two countries along the Caucasus Mountains. The same logical demarcation applies to the old Soviet Union's borders in general. These borders were rational and, after decades of integration, very difficult to completely abolish even when the Union no longer existed. We expect, therefore, a process to continue in the next decade in which Russia returns in various ways to the old frontiers of the Soviet Union.

This poses three issues for Europe. First, the Russian Army will return to the Polish frontier. Second, Russia will seek to reabsorb the Baltics. Finally, if Ukraine re-federates with Russia, then Russian forces will again be stationed along the Carpathians, facing NATO member Hungary as well as non-NATO countries in southeastern Europe. All of these events pose challenges for Germany, but the return of Russian troops to the Polish frontier is particularly frightening. Whatever Russia's intent, the Russian capability inevitably poses a threat to Germany. The Polish frontier is currently undefended and extremely difficult to defend. Apart from some rivers, the Polish and German plain is a traditional highway of invasion. Germany cannot ignore the Polish frontier because it is, in effect, Germany's eastern frontier.

NATO has expanded without paying particular attention to military considerations. This is because it is now primarily a political system for maintaining European consensus and for allowing the United States to have an instrument for influencing and controlling European affairs. Very little attention has been paid to fundamental issues like: How does one defend Poland; how does one get troops to Hungary when Hungary is not connected to NATO and has no ports; and what do you do with non-NATO Slovakia that is a bayonet between Hungary and Poland? The general response has been to ignore these questions, because there has been no credible threat to warrant any thought about the matter.

But if the Russians return to the frontiers, the matter will have to be addressed. Who will defend Poland? It is our expectation that the United States will be extremely reluctant to deploy massive forces in Poland. France may be willing to do so, but not in the quantities needed for adequate defense. That leaves Germany's Bundeswehr. A deployment in eastern Poland will require logistical facilities throughout the country. Apart from raising serious hackles in Poland, where memories of German troops are still a raw wound, Germany would not be able to forward deploy without a substantial increase in its military forces.

This is where it gets interesting. France will not deploy sufficient forces to defend Poland nor will the UK. Neither has them, and the cost will be enormous, particularly for as distant a threat as the Russian threat to Poland. At the same time, regardless of German intent, they will be extremely uncomfortable with a massive German buildup of any sort.

Apart from the general concern of European disequilibrium, the Anglo-French fear will be that a German buildup will trigger a Russian buildup, triggering an arms race and confrontation that neither wants. They will try to restrain Germany, and to some extent this will work. On the other hand, the eastern half of Germany remembers Russian occupation quite as much as Poland remembers German occupation. Even the distant threat of reoccupation will force a German preventive measure. This will create tensions within the alliance, as Germany demands more help than France and the UK will provide, as France and the UK call on Germany to restrain itself and as Russia responds to perceived German bellicosity.

European De-synchronization

There will be no war, but the fabric holding Germany within the European coalition will certainly be tested in the coming decade. In the same sense, the fabric of Europe will be tested economically. Our fundamental theme for the decade is one of economic de-synchronization. This applies at the national and the regional level. One of the extraordinary things to notice is the tremendous disparity in performance among various EU members. For instance, growth in Europe's core economies -- France, Britain and Germany – have all slowed. France's estimated GDP growth for 1999 is 2.2 percent. British GDP growth is expected to be 1.4 percent. Germany's performance has been particularly sluggish. Estimated GDP growth in Germany for 1999 is estimated at 1.6 percent. Meanwhile, estimated GDP growth rates in periphery countries are also disparate, with Greece at 2.9 percent, Spain at 3.4 percent, Portugal at 3.1 percent and Norway at 1 percent.

Now, the underlying premise of the EU, including especially the monetary union, is a high degree of synchronization among economies. Monetary policy, loose or tight, has very different effects on economies at different stages in the business cycle. As a free trade zone, the EU posed serious challenges in a range of weak industries, such as agriculture. But the European Monetary Union (EMU) radically concentrates the problem. The UK, in a period of intense capital formation similar to the United States, needs a very different monetary policy than Germany, fighting desperately to maintain aging and inefficient neolithic corporations. A single monetary policy designed to support an entrepreneurial boom in a developing country like Greece is impossible. One that would satisfy a former communist country like Poland is impossible.

We did not expect the EMU to get off the ground. We were obviously wrong. Nevertheless, we regard the EMU as essentially unsupportable, and we do not expect it to survive the decade. The root of the problem is the global force that we have identified as de-synchronization, which does not only de-couple regions, but countries within regions. Consider the range of economic performance currently underway within the EU and in countries scheduled to join the EU. It ranges from euphoric booms to stagnation to outright depression.

The EU is an institution with a central bureaucracy but no central state. When the United States experienced economic de-synchronization in the 1850s, the result was civil war as the south sought to disengage and define its own economic policies. The matter was settled militarily. But the United States was a federation with a central government able to raise an army, wage war and suppress an insurrection. The EU is not even a confederation. It has integrated its economic processes to the point of having a single currency, but has not integrated its political processes. That means that there is nothing to keep a nation in the EU if it determines that it is in its interest to withdraw.

The EMU has therefore not been tested. The issue is not its worth against the dollar. Rather, it is the effect of the European Central Bank's monetary policy on the economic life of its constituent countries. A single monetary policy for an entity that is as de-synchronized as Europe is inconceivable. Some nations will be placed at a tremendous disadvantage. The political consequences within those countries will rapidly generate forces favoring withdrawal from the EMU. With no state apparatus to prevent secession and no tradition of loyalty to the EU's institutions, the only thing holding the entity together is national self-interest.

An argument, controversial but respectable, can be made that everyone benefits from free trade. No one can rationally argue that everyone will benefit from the same monetary policy when economies are as out of synch as Europe's. The political consequences are clear. Some, and it is unpredictable as to who, will withdraw from the EMU. These will not necessarily be the smaller countries. The determining factor will be political, not economic: It will be the perception by the public as to whether the EMU benefits them or not. It will be in the interest of politicians, particularly in the government, to deflect blame for economic dysfunction from themselves to Brussels and Frankfurt. As a result, the structure of the EU creates a situation in which governments have an interest in undermining public confidence in the EMU and the EU in order to evade personal responsibility. This creates an inherent instability within the EU.

It is an instability badly exacerbated by the EU. It is politically much easier to maintain a free trade zone than a monetary policy. But there is a backlash at work. The de-legitimization of the EMU will have ripple effects. Once it is clear that countries can withdraw from the EMU without the sky falling, other arrangements of the EU will come into question. Protectionist sentiment, already visible as fairly powerful forces in several countries, will be dramatically enhanced by victories over a unified currency. A unified currency without a unified polity creates power without unquestioned authority. The repudiation of the power in one area will call into question power in all areas.

FORECAST

Thus, there are two major forces at work in Europe that are potentially destabilizing. The growth of a Russian threat against Poland at a lower level than the mega-threat of the Cold War is one. The failure of European institutions to contain the centrifugal forces of Europe is another. These will not have catastrophic results during the coming decade. They will point toward serious dangers in the future.

The fundamental question is nationalism, and the most important nationalism is German nationalism. German nationalism is now well contained by global, north Atlantic and European institutions. However, at the bottom, within each European country, serious nationalist, anti-European sentiment is present. At the top, among the corporate elites, economic shifts can trigger anti-European sentiment. The idea that the institutions are robust that contain traditional European strategic forces is, we think, illusory.

Many of these illusions will be revealed during the coming decade. The growing withdrawal of the United States from risk taking, coupled with the re-emergence of Russia, will serve as a stabilizing influence. The degree to which the rest of Europe will take risks on behalf of German and Polish security is highly suspect. The willingness of some countries to endure double-digit inflation or unemployment or both while others prosper is even more suspect.

We do not forecast calamity in Europe in this decade, nor even later. We do expect fraying and disintegration of apparently solid institutions. The fraying will be both deeper and faster than most observers expect. The culmination will be to force Germany to once again defend its own interests in a world that is indifferent or hostile to its needs. And that is a dark corridor that Europe does not want to walk down ever again. We are not sure they will be able to avoid it. The coming decade will be about Europe's attempt to evade its own history.

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