The European Commission has more than doubled — to four percent — the amount it estimated only four months ago that European Union economies would contract. It has also pushed back its estimate of when economic recovery might be expected. Rather than the end of this year, the EU is not expecting to see any green shoots before the second half of next year by which time unemployment across the 27-member union is predicted to reach almost 11 percent.
These are tough figures which will test both the cohesion of the EU itself and the dedication of individual governments to the whole EU project. At an economic level, the European Central Bank (ECB) is struggling to keep a handle on events. It has cut interest rates — some have argued too slowly — but it has limited influence and control over the US-style fiscal stimulus packages of individual member states. Britain, which is not in the euro zone and therefore not subject to ECB rules, has thrown billions of borrowed money at its ailing banking and financial system and is expected to run a fiscal deficit of 9.5 percent this year. Ireland, Spain, France and Greece, which are in the euro zone, are all expected to break the rule that the gap between their spending and income may not exceed three percent. Ireland is heading toward a massive 11 percent deficit.
Meanwhile, the Germans, whose economy is slated to shrink by up to 4.5 percent, are refusing big borrowings to stimulate their business and banking sectors. Therefore how all the sharply different economic data from 27 euro zone countries can, for planning purposes, make any sort of sense at the ECB is a moot point. ECB President Jean-Claude Trichet could be compared to the driver of a speeding horse-drawn carriage with no reins in his hands.
There is, however, something else that could get out of control because of economic hardship and that is bigotry and racism. In the past 20 years this has never been far from the surface. However, support for far-right parties in France and Germany, though still evident, shriveled during the boom years. Unfortunately history has shown that when times are hard, when jobs are lost and when families struggle to put food on the table, racist parties, not least the Nazis in Germany, are able to push themselves to political power.
To argue there are now social nets to catch the poor is to miss the point. Unemployment and state handouts are both corrosive. And of course the proportionately greater victims of the downturn are immigrants, often from Muslim countries. They had a raw enough deal, even during the good times. How much tougher is it for them now? And if they take to the streets and protest, as is their right, will not such demonstrations play into the hands of the bigots and racists?
It is worrying to consider that throughout the EU, governments are busy watching the financial dials. There are other dials, indicating social pressure build-up, which they should be watching no less carefully.
Obama’s ‘Af-Pak’ plan gives little hope
US President Barack Obama has launched a diplomatic initiative to restrain Taleban militants in Afghanistan and Pakistan. His meeting with Afghan President Hamid Karzai and Pakistan’s President Asif Ali Zardari this week is a step in that direction. The Independent in its editorial yesterday detailed the hurdles the United States faces in handling the issue. Excerpts:
This week’s meeting in Washington of the presidents of the United States, Pakistan and Afghanistan marks an important stage in Barack Obama’s pursuit of a so-called “Af-Pak” strategy. Unlike his predecessor, he sees Pakistan as a foreign policy priority and views its worsening turmoil as indivisible from the crisis in neighboring Afghanistan, hence the diplomatic drive for the first summit involving all three leaders.
Obama is right to stress the need for linkage between Afghanistan and Pakistan and right to press Hamid Karzai in Kabul and Asif Zardari in Islamabad to cooperate. Their regimes sink or swim together. Both are up against strong and growing insurgencies which neither they, nor the US, can afford to see gain much more ground if the momentum behind them is not to become unstoppable. At the same time, both men are weak and unable to control their countries. The dilemma for Washington is that while it has little confidence in the two presidents, it cannot abandon them, lest that destabilize the situation further. Meanwhile, the US is exploring options in Pakistan. Thus, while Obama rolls out the red carpet for Zardari, Hillary Clinton’s team is reaching out to Zardari’s former ally-turned-rival Nawaz Sharif, seen as having more influence with the country’s Islamists.
Whether the US can press Sharif into a formal power-sharing deal is another matter. Zardari might be grateful for any agreement that left him as president, while Washington believes that a broader political front in Islamabad might have more success in preventing an Islamist takeover.
But the two men have a poor history of working together and Sharif may well feel he has nothing to gain from propping up an unpopular president. Obama may therefore find himself stuck with the two leaders he is greeting this week — diminishing his chances of improving security in this vital region.
