Posted Sep 13, 2016 by Martin Armstrong
QUESTION: I saw you at your presentation in Dresden last year. Things in the East are rather different from the West in Europe. Do you have any comments on this great divide?
Thank you for coming to Dresden.
ANSWER: There is a great divide in Europe between East and West that is rarely, if ever, talked about. A tremendous disparity has emerged after the fall of the Berlin Wall. The Euroland is not one happy place. Indeed, some countries are members of all European integration levels (EU, Eurozone, Schengen), such as Estonia, Latvia, Lithuania, Slovakia, and Slovenia. This stands in contrast as other countries are members of the EU and of the Schengen area, but not the Eurozone such as Poland, the Czech Republic, and Hungary. Some others are just EU members, forming a second-class member status, including Bulgaria, Croatia, and Romania as well as Britain even before BREXIT. There remains a reluctance to provide these countries with the privilege of the freedom of movement within Europe (Schengen area). To this chaos, we add the candidate states who were promised to be taken into consideration for immediate membership, but remain in political limbo such as Georgia, Turkey, and Ukraine.
Consequently, we have a hodgepodge of combinations with varying degrees of integration that embed different rights from one member to another. This creates real inequalities of treatment within the Euroland experiment. Eurozone member countries (those who use the euro) try to appear lofty and superior. Romania was actually the first country to apply for EU membership back in 1995. Nonetheless, Bulgaria and Romania are at risk of being left on the other side of the new Euro Wall being constructed by Brussels. Such a development would politically exclude these two countries and leave the risk that the Balkan region could end back within the Russia sphere when the economy turns down harder.
This great divide between East and West is a critical issue that threatens the stability of the entire EU plan. The refugee crisis has agitated the situation as the Schengen agreement begins to crumble. Furthermore, within Western Europe Eurozone, the cultural differences remain and all the attempts to force the federalization upon them has failed as evidenced by BREXIT impacting separatist movements.
Then we have Central and Eastern Europe who are not one homogeneous culture and they are at a great disparity economically. Average wages in Central and Eastern Europe range between €350 in Bulgaria and about €1100 Slovenia, which is only on par with the poorest countries in Western Europe such as Greece and Portugal. Wages in Bulgaria are about €330, which is even less than the Chinese earn.
Therefore, the entire idea of federalizing Europe has utterly failed. Adopting a single currency becomes highly deflationary because of these great disparities.