The terrorist attacks from Paris 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 as well expressed in the following three paragraphs.
“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 built on shared values but on the generation of economic gains and prosperity. Once the European 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.”
The list is not complete. All of this is now mixing and reinforcing each other. It is obvious that 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 debt restructuring becomes even more unlikely, governments will return to the proven instrument of war financing which is the printing press. The “Helicopter money,” a famous words coined by the renowned economist Milton Friedman as “helicopter drop” which is the figurative notion of handing out cash to the public, effectively fighting deflation, already asked before who will come into action faster and more generously than previously thought.
According to Daniel Stelter, the founder of the German think tank Beyond the Obvious, 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.
On the other hand, Europe will see more refugee policy dis-integration and the possibility of the exit of UK from the European Union. Already, before the Paris attacks, the other European countries only shake their heads in view of the German refugee policies. Daniel Stelter strongly argued that 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.
Daniel Stelter further noted that 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 will the UK leave the union. If EU’s 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.
Many European political pundits in discretion, argued that the “Schengen area,” the free movement within Europe, 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 that 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. According to Daniel Stelter, it is suffocating the economies of the periphery, as well as France. After seven years of economic stagnation and high unemployment, it is only a question of when, not if, a country decides to leave. The discussion in Finland is a case in point.
The Parliament of Finland, on 16 November 2015, decided to debate next year whether to quit the euro, in a move unlikely to end membership of the single currency but which highlights the dissatisfaction of the people with their country’s economic performance. As Reuter reported, the decision follows a citizens’ petition which has raised the necessary 50,000 signatures under Finland rules to force such a debate, probably the first such initiative in any country of the 19-member euro zone. Maija-Leena Paavola, who helps guide legislation through parliament, stated that there will be signature checks early next year and a parliamentary debate will be held in the following months.
The petition which will continue to gather signatures until mid-January next year demands a referendum on euro membership, but this would only go ahead if parliament backed the idea. Despite the initiative, a Eurobarometer poll this month showed 64 percent of Finns backed the common currency, though that is down from 69 percent a year ago. But the Nordic country has suffered three years of economic contraction and is currently performing worse than any other country in the euro zone.
Some Finns say the country’s prospects would improve, if it returned to the Markka currency and regained the ability to set its own interest rates, pointing to the example of neighbouring Sweden, which is outside the euro. The Markka could then devalue against the euro, making Finnish exports less expensive. Paavo Vayrynen, a Finnish member of the European Parliament who launched the initiative stated that since 2008 the Swedish economy has grown by 8 percent, while ours has shrunk by 6 percent.
Finland’s centre-right government is struggling to balance public finances and improve export competitiveness through “internal devaluation,” including cuts to workers’ holidays and other benefits, amid opposition from Trade Unions. Before 1992, Finland devaluated its Markka currency time and again to improve export competitiveness.
Finland remains officially to euro zone membership. “Finland is committed as a member of Economic and Monetary Union to promote the stability of the euro area,” the governing coalition says in its government programme. A recent report by Euro Think Tank of Finland, a group critical of the euro, put the one-off cost of returning to a floating Markka currency at as much as 20 billion euros, but said the move would make sense in the longer run. According to Vesa Kanniainen, a professor of economics at Helsinki University and a member of the Euro Think Tank, the exit would not be easy, but it must be viewed from the point of view of how it would help gross domestic product to grow.