Collapse: Europe After the European Union
Biteback Publishing, 2018, 320pp., $18.95
The British policy expert Ian Kearns, a founder of the European Leadership Network and erstwhile advisor to a former Secretary General of NATO, couldn’t be much more of a European. His shockingly pessimistic book, Collapse: Europe After the European Union, begins by running a large flag of Euro-patriotism up a tall mast: “The EU, it has always seemed to me, is a gift from one generation of Europeans to another and a signpost we ignore at our peril. . . .the path to a better life runs through European unity. To head in the other direction is to flirt with hell.” The rest of the book endeavors to prove, insistently and with escalating horror, how hellish that will be.
Kearns thinks the European Union will collapse, hence the title. A great deal has to go right for it to survive—and thus, very little has to go wrong for it to fall, its structures brought down in a domino effect of economic and political contagion. In an interview with me, he says that he’s “75 percent convinced that the euro will collapse in the next ten years” and that the euro is “a sitting duck waiting for the next crisis.” And if the euro collapses, the European Union will follow suit—bereft of purpose, its central mechanism for integration destroyed.
For a Europhile, this prospect is a powerfully painful one. His book reflects that, for though Kearns has been an academic, this book is more polemical than even-handed. It is an urgent, bracing, and at times angry catalogue of the European Union’s weaknesses: of its promises left unfulfilled, like the European army promised 60 years ago; of measures pledged to save the euro after its near-death experience in 2009 but left underdeveloped; of a political class too constrained by electoral considerations and partisan dogma to deal with the rise of populist challengers in Hungary, Poland, and now Italy. And of course, there is the Union’s inability to deal with the most visible cause of anger: mass, uncontrolled migration from Africa and the Middle East.
Kearns rightly sees economic mismanagement as the primary driver of anti-EU skepticism. Considering the bank shocks that shook the continent, he writes that the “politicians in charge at the time like to describe what happened as a banking crisis pure and simple. They are duplicitous in doing so. It was a banking crisis that took place in a regulatory context for which the political class, collectively, was responsible. Many banking executives and board members also behaved appallingly, either turning a blind eye to what they knew were deeply flawed lending practices or, worse, not understanding what they were in the first place.”
When reading Kearns’s strictures, it’s important to grasp what a prison the euro can be for some EU member states. As the Harvard economist Dani Rodrik writes, “it represents a treaty commitment from which there is no clear exit within prevailing rules of the game.” The Financial Times chief economic commentator Martin Wolf wrote in June that “the euro has been a failure. This does not mean it will not endure or that it would be better if it disappeared. The costs of a partial or complete break up are far too great. It means that the single currency has failed to deliver economic stability or a greater sense of a European identity. It has become a source of discord.” That is, it shouldn’t have been created, but now that it’s here you can’t escape without making matters worse.
The European Union’s richer states, notably Germany, with the European Central Bank (ECB) and with some help from the IMF, did give life support to the worst-hit state, Greece. But, writes Kearns, the debt repayment schedule dictated by Germany was widely thought to be impossible. He sees Germany, then and now, as in the grip of an “ordoliberal” ideology which privileges austerity and balanced budgets, striving to avoid the moral hazard it associates with a looser monetary stance.
The ECB initially took the same line as Germany. Kearns writes that “it totally overstepped the mark in terms of the legitimate role of a central bank and insisted on telling elected European governments what to do with taxpayer funds, while implicitly threatening to expel them from the single currency if they did not comply. In doing so, it was supported by pretty much the whole Eurozone policymaking elite, which insisted there was no alternative.” It is here—in the foreclosing of domestic politics, the rendering of any economic debate among parties of the Left and Right futile—that Kearns locates the great danger to the Union’s states.
Using Ireland as an example, Kearns explains how on the morning of November 18, 2010, the governor of the Irish Central Bank, Patrick Honohan, claimed on an interview with the Morning Ireland radio program that outflows of foreign funds from Irish banks had made large-scale support essential—and that a rescue loan from the European Financial Stability Fund would be available. The Irish finance minister Brian Lenihan had balked at asking for a loan “to avoid what he described as a Greek-style humiliation.” But once Honohan had gone public about a possible banking collapse, rejecting assistance would have sparked panic and a bank run. So Ireland applied for the loan and “was subjected to the same troika treatment as Greece.” A central banker, in concert with the “European Union elite,” had forced the hand of an elected government.
Kearns worries that a banking crisis—in 60-million population Italy, not in 5-million population Ireland—is one of several “triggers” which could cause an EU-wide breakdown. Italy’s banks had shed some of their debt under the previous center-left government, which more or less faithfully conformed to an imposed regime of austerity, and suffered for it by losing half its vote share in this March’s elections. But those reforms are not enough. Were a banking crisis to develop, Italy would require urgent support from other European states to avoid serious economic turmoil, but that support may be hard to come by: “Taxpayers elsewhere in Europe, and their political leaders, would not want to stump up additional support to help resolve and recapitalize Italian or other banks they consider to have been badly, irresponsibly or in some cases corruptly managed.” The Italian state would be the only backstop, and could only assist by taking on even more debt, adding to its enormous GDP-to-debt ratio of 130 percent, and raising the spectre of a default.
Italy supplies another of Kearns’s “triggers”—though he did not know it at the time he wrote the book. Between printing and publication, his fear that the government of a core EU member state would fall to populists came true: the Five Star Movement and the Lega (League), two very different parties that nonetheless agreed on populist economic programs and stopping immigration, came together to form a coalition.
The most powerful figure, the Lega’s leader Matteo Salvini, who took the post of Interior Minister, is among those—like Hungary’s Prime Minister Viktor Orban and the former adviser to President Donald Trump, Steve Bannon—with a strong interest in building an “Illiberal International.” He has long predicted the collapse of the euro, and is skeptical about Italy’s EU membership. In late July, he welcomed Britain’s plan to leave the Union, saying that Britain could rely on Italy to be a “friend” during talks with the European Union, and that Prime Minister Theresa May needed to “impose herself” on the European Parliament: “My experience in the European parliament tells me you either impose yourself or they swindle you.”
The greatest external enemy to the Union is a Russia led by Vladimir Putin, who sees the West as intent on destabilizing his regime and thus is dedicated to getting his punches in first. Kearns sees Russia as committed to the European Union’s destruction, a commitment that’s been bolstered by the Kremlin’s grasp of social media and all the damage it can do. He claims that “Putin understands the use of these media better than many in the west”:
Russian strategy seems to be informed by a very acute understanding of the European Union’s own weaknesses. Putin knows that the 2008 financial crisis and subsequent sovereign debt crisis in the euro area caused economic chaos across the EU. He knows that that crisis contributed to the biggest questioning of the viability, credibility and legitimacy of the liberal order and Western market economies since the 1930s. He knows it weakened the ability of European states to invest in their own defence. . . Putin has seen an opportunity. Illiberal forces have come to the fore and Russian policy has been designed to help, encourage and profit from them. If they can be encouraged and even financed to disrupt EU and NATO unity, then the EU and NATO can be weakened and perhaps even brought to the point of disintegration, empowering Russia in the process and possibly delivering to it the sphere of influence in eastern Europe it has long desired.
The largest threat to NATO now, incredibly and still inconceivably for some, is from the President of the United States. He presents such a threat in substantial part because of the Europeans themselves. All, with the partial exceptions of the United Kingdom and France, have relied on the United States for protection at very little cost to themselves. Trump is correct to observe that Germany, with a budget surplus last year of €36.6 billion (over one percent of its €3.26-trillion GDP), could easily afford to take its defence expenditure from 1.2 percent of GDP to the 2 percent NATO target. Kearns writes that “without firm U.S. support, a destabilised Europe that has underinvested in its own defence capability for decades will lie dangerously vulnerable and unable to act even when circumstances demand it.”
Still, even if Germany and other states did up their defense spending as promised, Trump may not be satisfied. All U.S. Presidents have tried to make the case for more spending, usually in vain, but Trump is another piece of work. As Adam Garfinkle has asked, “What. . . .can we make of a man who, speaking on behalf of the U.S. government, insults his alliance hosts in their own country and continent, and stands with a mendacious authoritarian Russian leader against his own allies and indeed his own intelligence services?”
What Kearns makes of him is this: “Trump’s world is a world of raw power politics unconstrained by rules, and of transactional bilateral deals wherever they can deliver narrow advantage. There is no concept of wider American leadership responsibility, no sense of global leadership in defence of a more enlightened sense of self-interest. From the economic sphere to efforts to avoid major power conflicts, Trump rejects the ideas and institutions developed at the mid-point of the twentieth century as an answer to protectionism and devastating war.” Kearns believes that, while Putin must be resisted by a counter display of credible force and a closer focus on his use of media and propaganda tools, Trump must be dealt with through appeals to reason—and if that fails, as seems likely, then through discussions and lobbying with other parts of the U.S. establishment: the military and Congress among others.
Kearns goes so far as to say that, should the breakdown in the Union happen as he foresees it, “even peace cannot be taken for granted”: a very grand statement, but one which, when pressed in an interview, he repeats. “When you have nation-states, hard-pressed, a multipolar world with no agreement on spheres of influence, then the traditional European problem of how to manage the balance of power returns. We should hope for peaceful resolution. But historically, Europe has a bad record.”
Advice for how to deal with the frightening dystopia Kearns imagines is, by contrast, scanty—a few pages on Purgatory after a long treatment of Inferno. His recommendations include cracking down on the tax evasion and corruption rife in many parts of the Union, including the Commission; strengthening external borders against migrants; dropping any plans for a fiscal union and making clear that these are matters for national governments; completing the banking union; and greatly increasing aid to and involvement in the poorer countries of Africa—a case most strongly made by the Oxford economist Paul Collier. A European Monetary Fund should be established, but one which doesn’t order the recipients of its assistance to follow rigidly austere rules; NATO should be further strengthened, sanctions on Russia kept in place and democratic practice in the European Union deepened, so that it might “fight more forcefully for the values it is supposed to embody.”
If the hour for such measures has come (or is overdue), cometh also the man, or woman? “What the moment actually requires,” Kearns writes, “is a set of politicians who can make the reforms that are necessary and politically possible.” I asked him over the phone if he thought these leaders existed, or were in the wings. “Europe needs politicians who can understand what’s required,” he said. “I believe in politics and in the capacities of politicians. But the politicians now don’t seem able to articulate the challenges we face. They are not engaged with the trend of current events.”
So that’s a no. Kearns believes the euro will fail, and that its failure will cause the Union to crumble. The book recalls an old New Yorker cartoon, where one man is saying to another at a cocktail party, “Of course I don’t go all the way with him, but his logic is impeccable.” I do go much of the way with him, but cannot share his belief that French President Emmanuel Macron has the right strategy for the European Union—that is, much closer integration. Very few EU members now want that; indeed, the Dutch Prime Minister, Mark Rutte, explicitly rejected it earlier this year.
The European Union can only now continue as a two-speed entity, with those few states that wish to proceed, through integration, to something like a federal state allowed to follow that path. For the rest, as Rutte emphasized, the better bet is to retain sovereignty in the national legislatures and governments within a common market and a structure in which a myriad of bilateral agreements (as on climate change and defense) are encouraged. It’s an approach which might have obviated the need for Brexit, a process damaging to both the United Kingdom and the rest of the European Union.
Kearns’s reasoning, impeccable or not, carries weight, based as it is on his experience of working in EU and NATO forums, and his clear-eyed observations of the events and movements that have reshaped the continent’s politics. His book is an unsparing account of the bleak state Europe is in—and it carries conviction.