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A Tale of Two Europes
Europe’s Psychological Gap

Is the gap between German-led northern Europe and “Club Med” growing? The latest economic figures out of the Eurozone show that uneven growth in 2013 widened the gap between north and south. The Wall Street Journal reports:

Gross domestic product in Germany—the currency area’s largest economy—was 0.7% higher in the fourth quarter than the third, the national statistics agency De Statis reported Friday. That marked a significant pickup from the 0.1% expansion recorded by Germany in the three months to September.

But economic growth slowed in France, while Italy endured its 14th straight quarter without an increase in output. Elsewhere, Greece’s economy contracted again after three quarters of expansion, a development that may reflect growing uncertainty ahead of January elections that saw the left-wing Syriza party lead a new government. Greece wasn’t alone, however, as the economies of Cyprus and Finland also shrank.

One reason for Germany’s success: Its export-oriented economy benefits when worries about the health of its partners and the stability of Europe’s monetary system make the euro cheaper against other currencies. In the same way, Germany could be the biggest winner as the ECB moves into quantitative easing; an even cheaper euro will deliver another boost to the export powerhouse.

This is going to reinforce the psychological gap between Germans and their Club Med neighbors. In countries like Spain, Italy, and Greece, the public feels that Europe is going through a major crisis and that society is being stressed past the breaking point by mass youth unemployment. In Germany, people are more likely to feel that things are going well, apart from the unreasonable grumbling by hot-headed, uncompetitive Latins.

The gulf in perceptions and psychology is going to make it harder for European policy makers to sell sensible compromise solutions to voters across the Eurozone.

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  • FriendlyGoat

    Europeans either have enough sense to hang together, or they don’t. There is nothing to be gained from fragmentation and squabbling.

  • LarryD

    If the EU were just a free trade zone, it could weather this. But no, the European elite wanted a “United States of Europe”. What they built was a new Franco-Prussian empire. Unfortunately, Greece et al don’t want to work as hard as the Germans, but they aren’t willing to live like their productivity can pay for. And the Germans are no longer willing to support them. This is not a sustainable situation. Neither the Greeks nor the Germans are willing to change, so a break up of some sort seems the most likely result. Given that most populations are unhappy at being ruled from Brussels, the break up could be a lot more extensive than just the southern states.

    Politicians keep fogretting that the whole point of democratic institutions is to allow for change before things get so intolerable that the populace revolts.

  • Curious Mayhem

    That’s one of the tragic ironies of the euro: instead of forcing convergence among economies, it’s reinforced differences and caused the divergences to be more extreme than ever.

    This is why the euro must be terminated as soon as possible. It threatens to blow apart the basic cooperation and peace among European countries and unwittingly turn much of the continent into an unwilling German colony — through no intention of the Germans, I should add — it’s just going to land in their lap.

  • Fat_Man

    I think we should consider if, with the Cold War fading into the past, and the EU dying of its own weight, we are entering a new era of geopolitics in Europe. if Germany is the strongest country, then France will seek to balance it by an alliance with Russia. The UK, distrusting France, might flirt with Germany, but not ally. They might seek to ally closely with the US to preserve the North Atlantic. The Balkans might look to Russia as their protector from the Germans based on Pan-Slavism and the Orthodox religion. Poland, and the Baltic States might be in a very uncomfortable position, but they might be able to preserve their independence by allying with Sweden and Finland.

    Fun Stuff, eh.

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