04 September 2018
Prince Michael of Liechtenstein, GIS
After two world wars, which were also two European civil wars, the continent lay in ashes and divided. Central Europe was subjected to Soviet rule behind the Iron Curtain, while Western Europe held out under the protection of the United States. France and the United Kingdom officially belonged to the victors, but lost their role as global players and had to dissolve their colonial empires in the 20 years following World War II.
There followed a European miracle, strongly based on the close realignment and newly forged friendship between France and Germany. This led to the European integration process and the European Economic Community (EEC). The resulting single market was a huge success and Europe emerged as a global economic power to be reckoned with. With the collapse of the Soviet Empire, the European Union was further strengthened by the accession of new members from the Baltic region and Central and Southeast Europe.
Over the past 30 years, however, the world’s economic center of gravity started to move from the North Atlantic to the Pacific. While European countries still enjoy a technological lead in a number of sectors, their economies have been hobbled by overregulation, bloated welfare states and protectionist measures (mainly introduced under the pretext of protecting consumers and leveling internal competition through “harmonization”). Europe’s oversized bureaucracies and staggering sovereign debt threaten to strangle its market economies, destroying prosperity, undermining property rights and finally leading to the collapse of unsustainable social security systems.
Besides imperiling their own financial security, European powers also neglected defense – in part out of moral arrogance. They forgot that military strength can be an important factor in global competitiveness. As a result, Europe has remained in security matters an American protectorate, and at best a junior partner of the U.S.
To stay competitive globally, Europe – though geographically part of Eurasia – needs a close partnership with the U.S. A strong, prosperous and soberly self-confident Europe would be a welcome asset on both sides of the North Atlantic. By leveling the geopolitical playing field, a stronger Europe would also be better positioned to improve relations with the East, especially with Russia.
It needed President Donald Trump’s “direct diplomacy” to issue an overdue wake-up call. Just this past week, French President Emmanuel Macron, German Finance Minister Olaf Scholz and German Foreign Minister Heiko Maas declared that Europe needs to get stronger. Unfortunately, these statements sounded more like expressions of defiance toward Washington than real declarations of intent. Specifics were noticeably lacking.
The solution to Europe’s weakness is not more government programs but letting market forces work
It is certainly obvious that Europe’s defense industries need to cooperate more closely to achieve economies of scale. President Macron’s calls for more self-reliance on defense and Mr. Scholz’s advocacy of mergers to improve the efficiency of defense production and procurement make sense. One hopes that implementation will follow, bearing in mind that a planned merger of Airbus and BAE Systems defense units was aborted by European governments just a few years ago.
Heiko Maas is promoting the development of a European financial clearing system independent of SWIFT. Competition in this area would certainly be beneficial. Still, Mr. Maas’s reasoning is faulty, since it starts not with economic efficiency but with a desire to break free from the U.S.
European policymakers are right to worry that their continent lags behind the U.S. and China in digital technology and artificial intelligence. However, the solution is not more government programs but letting market forces work. European overregulation is the stumbling block.
We can be happy if Berlin and Paris work together effectively to promote European interests. However, if this cooperation is driven by opposition to the U.S. and brings more statism, instead of Europe’s defining principles and strengths of diversity, regional competition and subsidiarity, it would be disastrous.