The End Of The Affair

Collin May at Innocents Abroad argues that the recent actions of France and Germany towards NATO will be its death blow. Given the recent flare-up between the Europeans and the US, this wouldn’t be a great surprise.

Nor is it necessarily bad. NATO has essentially subsidized European defense ever since the end of the Cold War. All the way back in the mid-1980’s Melvyn Krauss made the argument that NATO was essentially weakening the West by freeing the Europeans from actually having to think about their own self-defense. It would appear that Krauss’ thesis is proving true – Europe now takes for granted the military benefits it recieves from the United States.

However, France and Germany are essentially leading Europe into a messy double suicide. The European Commission has already chided both for breaking the limits on national debt in the Maastricht Treaty. (The treaty limits the national debt of Euro-zone nations to no more than 3% of GDP.) The reaction to both countries has been to raise taxes.

Except they’re running into the Laffer Curve. The Germans have been trying to stem the outward flow of capital, but when the government maintains a 25% tax rate on savings, it’s clear that no one in their right mind would want to do business in Germany. Rather than raising revenue, the horrendous rate of taxation is actually decreasing revenue at an alarming rate.

The governments of France and Germany are hedging everything on the idea that they can stick together and ride out the storm. That isn’t going to happen. Without fundamental and massive structural changes to the very fabric of both societies, the weight of their massive social spending and disintegrating social values will only pull them under that much faster. At this point, there are two nightmare scenarios that could result if things get much worse.

One is that that governments of both countries collapse. Both France and Germany see massive civil and financial unrest, and both Schroeder and Chirac are sent packing. Neither of them are particularly popular, and both are tainted with scandals. At that point, they could easily drag all the Euro-zone countries into a massive depression. The effects of Europe going under economically would probably do much the same for the rest of the world.

There’s another option rooted in European history. NATO collapses and both France and Germany remilitarize in order to distract from their crumbling economic and social foundations. It seems farfetched, but many totalitarian states start with the kind of socialism that now burdens Europe. At that point, the anti-American rhetoric that’s being poured out by the European intelligentsia could very well break out into full conflict. Granted, it seems an extreme scenario, but European history is full of scenarios exactly like this one.

As much as the Europeans seem to love criticizing the US on every issue from the death penalty to Iraq, the governments of France and Germany are leading the rest of Europe off a cliff. The reckless anti-Americanism of the Franco-German alliance is a cover for two states in a condition of deep decline. Unless the people of Europe are willing to pull back this facade, the future for both nations is becoming increasingly grim.

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