Wednesday, 13 June 2012

The make or break moment - The globalisation of politics.

We are living through some very interesting times. Change is the word of the day. June will be remembered as the month which intensified a process that will last the summer and when it will end, in the autumn, the world will function in a different way. It is a rearranging process with power being transferred from one side to another. It is still unclear how it will all look like when it ends but it is almost sure that the world's power balance will be quite different compared to what we have today.

The never ending eurocrisis needs to end 

One of the most important elements of this rearranging of power will be the result of the eurocrisis. In my view, the crisis in Europe has entered its final stage. It is still unclear what the result will look like but it is clear to me that the current situation can't last for long.

The outcome of the eurocrisis will be mostly decided in two countries: Germany and Greece. The Greek election and Germany's reaction to the result of this election will be decisive for the fate of the European Union. It is not just the euro that is at stake, the entire EU can fall if the crisis is not carefully handled. And looking at how the politicians have handled it so far, the outlook is not rosy. I do believe that the political class will eventually make the right decisions; when faced with disaster, even Angela Merkel will blink.

 Greece's membership of the eurozone is no longer the focus of the situation. With a third bailout probably needed (though it needs to be mentioned that the macroeconomic situation of the country is improving- the social situation, on the other hand, is poised to worsen for months to come), the electorate might as well vote for a renegotiation of the bailout and , effectively, a Greek exit from the euro. Without wanting to sound cynical, in the bigger picture, Greece does not matter anymore. But the contagion that Greece will cause will be more than decisive. If  Greece votes to leave the euro, a bank run around Europe will be inevitable. Italy will have no choice but to ask for a bailout. It is hard to describe how bad the situation could quickly become. The entire European system, in its entire complexity, might fall apart. There is only one thing that can prevent this. A fiscal, banking and political union. A federal Europe. But how can you create a superpower in less than a week?

Considering that a suspension of the Schengen Agreement, the suspension of the free movement of capital and goods and even a suspension of the bailout funds and the EU budget as a whole, have all been considered as potential responses to a Greek exit, a federal Europe would be a less drastic response. At the end of the day, no politician will want to be blamed for causing the fall of the European Union, especially considering what the socio-economic consequences of such a disintegration would be.

My bet continues to be that Europe will agree on deeper integration, with or without Greece. It will be Germany who will play all the shots but Angela Merkel will need to improve her communication with both the German and the European public. She will have to explain why she demands certain things and she will need to start thinking in European parameters, not just German (I would go as far as saying that a full scale pro-EU propaganda/education campaign will be needed).

Tired of waiting on Europe, the world moves on

The process of integration will not be exclusive to the EU. Increasingly, the G20 will act like a proto-government of the world. Not necessarily a  government that is able to govern in an efficient way but a forum of discussion that will sometimes produce decisions for the entire world. This will be the case especially if Greece leaves the euro. The shock will have to be dealt with by the entire world, not just the EU. 

But after almost three years of crisis, the EU has lost most of its clout. Even a federal Europe will find it hard to impose itself in the G20. This has been increasingly clear in recent days. Brazil is now demanding more power for developing countries in exchange for higher contributions to the IMF. China is threatening a full out trade war on the CO2 issue, with its air transport companies being ordered to refuse to respect the EU rules that will become law at the beginning of next month. Russia is also refusing to cooperate on any major international issue, pursuing its own agenda (Putin has pretty much frozen relations with the West since his reinstauration and has recently been accused by the US of sending fighter helicopters to support Assad). The only other country that seems to support the EU (not for free of course, but its demands are not as stringent) is India. India, however, is failing to fulfill its potential and does not seem to be much interested in tackling the problems that are preventing its development.

A special factor in this framework is the US. America is searching for a new role on the world stage. It is time it recognizes that it can no longer afford to be the world's police force. It needs to start seeking alliances and act like a multilateral power. However, its economic  rhetoric is bothering many in Europe which correctly argue that it is in no position to lecture others on economic matters. Its decision to increase its military presence in Asia will probably bother China. It is probable to see the US increasingly isolated in the world, with formally warm relations with the EU, Japan and Korea but no 'special relations' (the UK being the exception as it will probably continue to obey its ally on any issue), especially if Germany becomes the leader of a federal Europe.

The process taking place this months and for the rest of the summer is very important for the future framework of power. As I see it, it is necessary for European states to start transferring power to Europe. Europe, however, will start transferring power to other world forums. It is a new stage of globalization, it is the globalization of politics, and like all the other important transitions in world history, it is a dangerous phase. Many things can go wrong. The system is already tense and a spark would be enough to start a fire. Syria, the fall of the EU, Iran, a trade war, the elections in the US, the transfer of power in China, populist forces taking control of European governments, these are all factors that can make the whole process a lot more complicated.  Lets hope that the summer will be one of progress, not conflict.


  1. “History is lived forwards but it is written in retrospect. We know the end before we consider the beginning and we can never wholly recapture what it was to know the beginning only.” (C.V. Wedgwood)

    If what British historian thought is true how can you be so bold in your judgments and predictions?

    Would the Americans still have helped the Mujahedeen and Bin Laden if they knew that they will target them afterwards?

    Many people predicted the imminence of the WWII. Economist J.M. Keynes for example. However their prediction was a negative one. They criticized the “hope over experience” attitude of those who believed that the peace reached at Versailles will last for long. Such predictions are easier to do because one can use reason and all the millennial experience of humanity.

    For example, do you really believe that ever the “wolf will lie down with the lamb”?

  2. I am not saying there will be peace all over the world but that politics will be global and not national. Politics are not peaceful at a national lever, why would they be at a global one?