Europe's Year of Decision

By George Friedman
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If the Europeans do not generate that sort of solution in 2013, it is time to seriously doubt whether a solution is possible and therefore to think about the future of Europe without the European Union or with a very weakened one. If, however, Europe does emerge with a plan that has general support and momentum behind it, then we might say that Europe is beginning to emerge from its crisis, and that, in turn, would be the single most important thing that happens in 2013.

At this point, a reasonable person will argue that I am ignoring the United States, which has different but equally significant economic problems and is also unable to generate consensus on how to solve them, as we have seen during the recent "fiscal cliff" affair, which will have many more iterations. But as valid as the comparison is on the financial level, it is not valid on the political level. The United States does not face the dissolution of the republic if it follows contradictory policies. The United States is more than two centuries old and has weathered far worse problems, including the Civil War and the Great Depression. The European Union is only about 20 years old in its current form, and this is its first significant crisis. The consequences of mismanaging the U.S. financial system are significant to say the least. But unlike Europe, the consequences are not an immediate existential threat.

The Other Costs of the Crisis

It is the political dimension that has become the most important, not the financial. It may well be that the European Union is in the process of dealing with its banking problems and might avoid other sovereign debt issues, but the price it has paid is both a recession and, much more serious, unemployment at a higher rate than in the United States overall, and enormously higher in some countries.

We can divide the European Union into three categories by measuring it against the U.S. unemployment rate, which stands at about 7.7 percent. There are five EU countries significantly below that rate (Austria, Luxembourg, Germany, Netherlands and Malta). There are seven countries with unemployment around the U.S. rate (Romania, Czech Republic, Belgium, Denmark, Finland, the United Kingdom and Sweden). The remaining 15 countries are above U.S. unemployment levels; 11 have unemployment rates between 10 and 17 percent, including France at 10.7 percent, Italy at 11.1 percent, Ireland at 14.7 percent and Portugal at 16.3 percent. Two others are staggeringly higher -- Greece at 25.4 percent and Spain at 26.2 percent. These levels are close to the unemployment rate in the United States at the height of the Great Depression.

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For advanced industrialized countries -- some of the most powerful in Europe, for that matter -- these are stunning numbers. It is important to consider what these numbers mean socially. Bear in mind that the unemployment rate goes up for younger workers. In Italy, Portugal, Spain and Greece, more than a third of the workforce under 25 is reportedly unemployed. It will take a generation to bring the rate down to an acceptable level in Spain and Greece. Even for countries that remain at about 10 percent for an extended period of time, the length of time will be substantial, and Europe is still in a recession.

Consider someone unemployed in his 20s, perhaps with a university degree. The numbers mean that there is an excellent chance that he will never have the opportunity to pursue his chosen career and quite possibly will never get a job at the social level he anticipated. In Spain and Greece, the young -- and the old as well -- are facing personal catastrophe. In the others, the percentage facing personal catastrophe is lower, but still very real. Also remember that unemployment does not affect just one person. It affects the immediate family, parents and possibly other relatives. The effect is not only financial but also psychological. It creates a pall, a sense of failure and dread.

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"Europe in 2013: A Year of Decision is republished with permission of Stratfor."

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