This “morality play” is spreading through Europe. We now see German political patriarch Wolfgang Schauble backing a candidate to replace Merkel as head of the CDU (Christian Democratic Union), who is openly courting the same voters that have left their party and gone to the anti-immigration and populist Alternative for Germany (AfD). That means a conservative push for Germany and a more populist approach for mainstream parties.
The common thread running through these events is the idea of a united Europe. This idea was a driving force in the foundation of the European Union and is common in the establishment and/or “elite.” Up until a few years ago, the idea was popular across the political spectrum but support has weakened as economic times changed. It was never particularly feasible, but the effort made sense for a continent so damaged by centuries of repeated wars. The problem is that the EU can’t achieve its goals unless it gets stronger and much of the public has had its fill of centralization. I don’t know how they can solve this. Brexit, if it happens, may turn out to have been the test case for a full dissolution.
How that will unfold is hard to predict. For now, there are more immediate problems. Victor Hill thinks “a disorderly Brexit will be the spark that sets the Eurozone tinderbox aflame in the first half of 2019.” The tinderbox is already full in Italy and France. It won’t take much heat for that kettle to boil over.
But that’s not all.
Trade Threats
Speaking of unity, last weekend’s Buenos Aires G20 summit was a chance for world leaders to forge common ground on important global issues. That’s not exactly what happened but President Trump’s trade discussion with Chinese president Xi Jinping looked initially like a bright spot. They agreed to stop making things worse for a few months, at least. Markets were more skeptical after digesting the news—rightly so, at least from my standpoint.
As I’ve said, there are real issues with China on intellectual property and more. It is not unreasonable to ask for an open and fair playing field. China is no longer an emerging market nation. It has emerged, at least the eastern half. Beijing should play by the same rules as the rest of the developed world. But getting agreement with China is going to be a hard slog.
One encouraging but little-reported G20 event: U.S. Secretary of State Mike Pompeo and Treasury Secretary Steven Mnuchin gathered their peers from the smaller G7 group for an unscheduled dinner. According to Ian Bremmer, they made significant progress on working together to solve the China issues. This should be positive if it continues.
Meanwhile, however, Louis Gave explains why problems with China may be bad news for Europe at a time when Europe doesn’t need any more challenges (bold is mine).
It is no secret that Trump is surrounded by men who want to “take China down,” who have argued at length that China is a house of cards built on unsustainable credit, and that all the United States needs to do is give a gentle nudge for the whole edifice to come crashing down. So far, this talk of China’s vulnerability has proved way off-target. For all of the dire predictions of an imminent debt crisis and financial meltdown, China is still standing very much upright.