Fra Mauldin Economics:
The Demographic Realities of the European Immigration Crisis
I called my good friend and geopolitical strategist George Friedman (stifter af den internationale tænketank Stratfor med fokus på geopolitik.RED) a few days ago and found him wandering the streets of Vienna, but we still managed to spend some time talking about the immigration crisis that is sweeping across Europe. I jotted down a few notes from him:
This is not simply about migrants. It is one more thing that shows Europe does not work and cannot make decisions.… What we are seeing before our eyes is the collapse of the European project. There is nothing meaningful when we say “EU.” It was an institution that functioned for a while, but countries are no longer paying any attention to Brussels.
Once again we are seeing divisions at the heart of Europe based upon economic and demographic realities. As I wrote in my book Endgame, the productivity and wage differentials between Germany and the European periphery have created massive trade imbalances. Normally these are solved through adjustments in the currencies of the countries involved, but the Eurozone locked in such imbalances, leaving as the only solution a deflationary collapse in wages. This has of course also drastically increased unemployment in the peripheral nations.
Those problems, coupled with the massive debt run-up in the peripheral countries, has opened up a yawning divide in Europe. Greece is only the first country to totter at the edge of the abyss. And yet Germany remains a profound believer in maintaining austerity until true reforms have been implemented. No debt relief without reforms is their mantra.
For Europe, the Grexit and refugee issues are two manifestations of an underlying and much more problematic challenge. The continent’s various unification measures are in danger of coming unraveled.
Avoiding Grexit was relatively easy. Yes, the fights were ugly, but it was a simple matter to sweep everything back under the rug. Sweeping a few million immigrants (you don’t think they’ll stop coming, do you?) under the rug is a much greater challenge.
How Europe handles the refugee crisis is potentially far more important than the Grexit issue. Some bad decisions could lead to serious problems in not too many years. This is a major development.
And the immigration crisis highlights another deep divide.
A New East-West Rift
German Chancellor Angela Merkel says the country will accept 800,000 refugees this year. Even considering Germany’s size, that is a very generous number that has earned Merkel praise from humanitarians everywhere. At the same time, European Commission president Jean-Claude Juncker wants to impose quotas for refugees and immigrants upon the entire European Union. He has come up with the idea of “shared responsibility” to push this new doctrine.
This is all well and good for nations like Germany that need immigrants, but much of Europe is really not in need of new workers, given their present severe unemployment problems. Not to mention that in those countries budgets are already strained and taking on the task of housing tens of thousands of immigrants and refugees is not cheap.
Some of Germany’s neighbors are not pleased. In particular, the formerly communist Eastern European states resent the German-led efforts to impose on every EU nation a quota of refugees it must accept.
This is where we start to see parallels with the Grexit crisis. Recall how EU leaders in Brussels tried to steamroll their way over all opposition. They’re doing it again.
Consider this little note from last week’s Charlemagne column in The Economist.
Policymakers are fizzing with ideas, from the use of development aid to bring recalcitrant transit countries into line to the strengthening of a Europe-wide border guard. Once the principle of shared responsibility for migrants is established, says another official, the numbers of relocated migrants can be scaled up, and new programmes established, without too much wrangling.
What arrogance. Brussels will bring those “recalcitrant transit countries” back in line. The “wrangling” will be over once they establish the “principle of shared responsibility.”
“Shared responsibility” is exactly the principle the EU never manages to establish, regarding immigrants or anything else. Yet nameless officials still tell Charlemagne not to expect “too much wrangling.”
Ambrose Evans-Pritchard launched into an epic rant on EU arrogance last week. I recommend you read the entire post, but here is a taste.
Personally, I think Europe’s nations should open their doors to those fleeing war and persecution, with proper screening, in accordance with international treaties on refugees, and in keeping with moral tradition.
Those countries that etched the lines of Sykes-Picot on the map of the Middle East in 1916 as the Ottoman Empire was crumbling, or those that uncorked chaos by toppling nasty but stable regimes in Iraq and Libya, have a special duty of care. But the point is where the final authority lies.
By invoking EU law to impose quotas under pain of sanctions, Brussels has unwisely brought home the reality that states have given up sovereignty over their borders, police and judicial systems, just as they gave up economic sovereignty by joining the euro.
This comes as a rude shock, creating a new East-West rift within European affairs to match the North-South battles over EMU. With certain nuances, the peoples of Hungary, Slovakia, the Czech Republic, Poland and the Baltic states do not accept the legitimacy of the demands being made upon them.
But it is the countries of Eastern Europe that are bearing the brunt of the immigration crisis. This map from the New York Times depicts the general flow of immigrants from Turkey into Germany. It was not all that long ago that one could pass freely from one country in the EU to another, but now border walls and controls are being erected.
