The Coming EU Crackup

It’s a late start today—I had a funeral to attend, then had some other problems to deal with.

Having flogged the MAL Raid for several days, the situation in Europe seems ripe for renewed consideration. The news just keeps getting worse, and yet the European ruling class shows little sign of coming to grips with the new reality their sanctions war on Russia has brought on. They’re still saying the same crazy things about Russia, they’re still partying wildly while the subject populations are told to tighten their belts, and they have no new ideas on offer. It all looks very bad.

A good way to approach this is to summarize a dialog earlier today at The Duran. This isn’t exactly a transcript, and I haven’t broken it down according to the two speakers, because they’re in total agreement with each other. I’ve mixed in some of my own comments that I believe simply expand on their observations. There’s no good news.

What will an EU economic collapse look like?

The Duran: Episode 1368

The dialog begins with a rundown of hold-the-line statements from the ruling class:

EU high representative Josep Borrell says the EU must "endure", outlasting Putin. No other option is considered, such as attempts to accommodate legitimate Russian concerns. The EU will continue, in the belief that Russia will ultimately be destroyed.

Macron came back from vacationing on various mega yachts to tell the French that they are facing "the end of abundance." They must sacrifice.

The Belgian PM said Europe will be in a difficult situation for 5-10 years. Basically, they'll be screwed for 5-10 years and simply have to trust that things will then get better.

The Spanish defense minister said EU citizens need to "prepare" for a very difficult situation economically.

What’s the reaction?

The rulers are telling their subjects: you'll be a lot poorer, everything will be terrible, life will be much worse--and yet no one pushes back! No one seems to ask, Why are we doing this to ourselves? Nor are the rulers actually offering any solutions.

This article is an example of dissent, but the rest of the German political spectrum quickly closed ranks against the SPD:

German Lawmakers Break Ranks, Demand Halt To Weapons For Ukraine Amid "Escalation Spiral"

And here’s a map of European energy prices that’s been making the rounds. To understand it, realize that until very recently anything over 75 Euros/Mwh was considered very expensive:

Those prices are actually going to get worse.

In the UK fuel prices will rise 80% in October, on top of the 57% increase in April.

What will be left of Europe if this continues for 5-10 years as promised by the Belgian PM?

All the EU rulers brought Europe to this point because they ecstatically slapped sanctions on sanctions on sanctions on Russia, imagining that the Russian economy would implode, hyperinflation would ensue, causing a political crisis that would lead to Putin being ousted. None of that has happened. Prices are falling in Russia, living standards are going up, production is rising.

Nevertheless, in spite of the fact that the sanctions policy has clearly failed, all the EU rulers can come up with is, We must persist. Why do they think things will be better in ten years? What will happen to change things? There is no plan.

Look at Germany floundering. The Germans were snubbed by Qatar when Germany sought a long term fixed price gas contract. They were snubbed by Canada. The US isn't delivering on its LNG promise. The only "plan" seems to be to tell EU citizens that they're lives will be terrible and try to prevent protests.

The EU political class never bends to economic reality, they always double down through political controls. A lot of people will say this was the plan all along--to smash the EU economy in order to proceed with the Great Reset. There might even be some truth to that. But there's no sign of any willingness to change course.

Germany's export machine appears to be doomed. The only answer seems to be more repression, more riot police, more control over information.

There are some dissenters. Salvini in Italy is asking, Are these sanctions against Russia a good idea? Hungary is in open rebellion against the EU. But the attitude of the EU rulers will not be to listen to these people but to knock them down.

Where does this take us?

Inevitably there will be a crackup, because this all comes on top of one bad economic policy after another, which has sapped Europe's economic vitality over the years. The sanctions war on Russia simply hastens the evil day. But there will be no change without a massive breakdown of the economic system, because all political solutions have been rejected.

What does a German economic breakdown look like? Every day news from Germany and the UK just gets worse.

The major industrial groups--Daimler, Siemens, etc.--will find it increasingly difficult to maintain their presence in Germany. But leaving will be difficult. De-industrialization will start to take hold, putting pressure on living standards, [breaking the social contract]. That will lead to pressure on the banking system, trade deficits rising, and a collapse in German credit--and German credit is what has held the whole EU together.

The UK? The UK will go the same, even faster. Any possible benefits of Brexit have been thrown away. The UK can't take advantage of such benefits when it's being crushed by energy costs. And yet, as an example of the intransigence of the European ruling class, the UK continues to involve itself in foreign adventures, including targeted assassinations in Russia:

As a sort of cherry on top of all this, Norway--which has replaced Russia as the biggest supplier of gas to Europe for now--is refusing to subsidize the rest of Europe. The Norwegian energy minister has said that Norway will not enter into fixed price contracts. Not only that, but Norway has said that it will greatly curtail shipments next month--just as the weather begins to turn--for maintenance reasons.

September is shaping up to be a watershed month in Europe. But back in the USA, Jay Powell—as predicted by Tom Luongo—is rejecting any quick pivot. The US faces the prospect of rising interest rates, with a goal of getting inflation back to 2%. If fighting inflation is the actual goal behind the Fed actions. The rise in interest rates here in the US will only make life that much tougher for the EU—sucking capital away from Europe. Powell knows this but doesn’t care—and he appears to have the backing of the big NY banks.