Europe’s leaders are battling to keep the eurozone (the countries using the euro as a common currency) and the wider European Union (EU) together in the face of a financial crisis that threatens to split partnerships forged over the last half century.
On Dec. 9, 2011, all the leaders of the member states except for Britain agreed to a fiscal union with central budget approval. While some deem this a monumental achievement, others think the proposed arrangement will fail to be ratified.
If the call for fiscal integration ends up rejected, will the dream of European economic union be over? Is Europe really in danger of fragmenting? And does Bible prophecy have anything to say on the matter?
The development of monetary union
The eurozone emerged from the formation of the European Monetary Union (EMU) in 1999 and quickly grew to include 17 EU nations. The euro replaced the national currencies of these nations.
While there has been no common representation, governance or fiscal policy regarding the currency among member states, some cooperation has taken place through the Euro Group meetings of the finance ministers.
With the recent period of financial crisis, the eurozone has established provisions for granting emergency loans to member states in return for the enactment of economic reforms.
The members have also established some limited fiscal integration, like their highly political and debated annual peer review of each other’s national budgets. And fiscal union could now become a reality, as mentioned.
Germany and France make up the backbone of the eurozone and have been pushing for tighter controls and integration. But they often encounter resistance from other members, who currently have an equal vote.
There have been high-level discussions over the past year regarding a major overhaul of the eurozone and the EU. The Reuters news agency reported on Nov. 9, 2011, that “German and French officials have discussed plans for a radical overhaul of the European Union that would involve setting up a more integrated and potentially smaller euro zone, EU sources say.
“ ‘France and Germany have had intense consultations on this issue over the last months, at all levels,’ a senior EU official in Brussels told Reuters, speaking on condition of anonymity because of the sensitivity of the discussions.
“ ‘We need to move very cautiously, but the truth is that we need to establish exactly the list of those who don’t want to be part of the club and those who simply cannot be part,’ the official said.
“French President Nicolas Sarkozy gave some flavor of his thinking during an address to students in the eastern French city of Strasbourg…when he said a two-speed Europe—the euro zone moving ahead more rapidly than all 27 countries in the EU—was the only model for the future.
“The discussions among senior policymakers in Paris, Berlin and Brussels raised the possibility of one or more countries leaving the euro zone while the remaining core pushes on toward deeper economic integration, including on tax and fiscal policy” (Julian Toyer and Annika Breidthardt, “French and Germans Explore Idea of Smaller Euro Zone”).
The same article later continued: “The latest discussions among European officials point to a more fundamental re-evaluation…including which countries and what policies are needed to keep it strong and stable—before Europe’s debt crisis manages to break it apart.
“In large part the aim is to reshape the currency bloc along the lines it was originally intended; strong, economically integrated countries sharing a currency, before nations such as Greece managed to get in.”
And the pace toward this development is accelerating: “While the two-speed Europe referred to by Sarkozy is already reality in many respects…the officials interviewed by Reuters spoke of a more formal process to create a two-tier structure and allow the smaller group to push on. ‘This is something that has been in the air for some time, at least in high-level talks,’ said one EU diplomat. ‘The difference now is that some countries are moving forward very quickly…The risk of a split, of a two-speed Europe, has never been so real’ ”(ibid.).
Attempting to keep Greece and Italy solvent
To ease the pressure to reorganize and reshape the eurozone and avoid a split in the short run, the bloc was forced to provide the funds to rescue Greece. Last October leaders of the 17 eurozone countries approved a 50 percent write-off of Greek sovereign debt held by banks and a fourfold increase (to about 1 trillion) in bailout funds held under the European Financial Stability Facility (EFSF), the vehicle financed by eurozone members to combat the debt crisis.
Former European Central Bank Vice-President Lucas Papademos heads the new unity government in Greece and is working to implement the austerity measures required under the bailout agreement.
Italy’s government also approved austerity measures demanded by the EU and central bank officials, effectively dodging a meltdown for the time being. Former EU commissioner Mario Monti is leading the new Italian government’s efforts to tackle the acute debt crisis.
Yet while it has the third largest economy in the currency union, Italy’s Gross Domestic Product (GDP) is still around 5 percent below its 2008 level. So it’s hard to see how Italy can grow itself out of its 120 percent debt-to-GDP ratio. In addition, with interest rates likely to continue going up, it becomes more difficult for the Italians to cover the costs of borrowing to pay their debt.
Some economists therefore see the current austerity measures enacted in Italy as nothing more than kicking the can down the road. Concerns are growing that there may not be sufficient funds for a bailout later if that becomes necessary.
Breaking up is hard to do
While it appears the recent measures in Greece and Italy have helped ease the immediate threat of a eurozone economic meltdown, at least four other nations remain on the financial edge with structural and debt problems—Ireland, Portugal, Cyprus and Spain.
Many experts say dramatic changes are needed in the eurozone if the 13-year-old currency is to survive. Germany and France are pushing for closer integration and tighter controls inside the eurozone, including in sensitive areas such as corporate and personal taxation. The remainder of the EU would be left as a “confederation,” possibly expanding from 27 to 35 countries in the coming decade.
German Chancellor Angela Merkel called for a change in the EU treaty, pushing for all 27 EU member states to give their approval and saying that a rapid breakthrough is needed. German proposals would give the European Commission a stronger role in monitoring budgets and implementing sanctions for those that breach deficit rules.
This led to the Dec. 9, 2011, agreement. British Prime Minister David Cameron, whose country is a member of the EU but not of the eurozone, drew the ire of Chancellor Merkel and President Sarkozy when he was the only EU leader to oppose a financial pact that would have imposed tougher controls over member states’ fiscal policies. One of Cameron’s key concerns was that growing EU fiscal rules and regulations would unnecessarily burden London’s powerful financial district.
Sarkozy testily responded to Cameron’s decision by saying, “You can’t on the one hand ask not to be in the euro and at the same time wish to be part of all the decisions affecting a currency you don’t want and often criticize.” As for Germany, Merkel’s response to Britain was clear: “If you want to be part of Europe, you must submit to its rules” (Anthony Failoa, “Standing Alone,” The Washington Post, Dec. 11, 2011).
Cameron’s decision may be the first step toward Britain leaving the European Union. He is adamantly against a two-tier, two-speed Europe, fearing it would make those not in the currency union second-class citizens. He also questions whether eurozone countries can deal with their debts to survive as a union.
Others share his view, including Nobel Prize-winning economist Joseph Stiglitz. He’s stated that the euro could dissolve at “any time now” and that the eurozone nations are unlikely to “really” solve their sovereign debt crisis (“Stiglitz Says Euro Currency Could Dissolve at ‘Any Time Now,’” Bloomberg, Oct. 25, 2011).
The great divide
If the eurozone does eventually break up, how is it likely to divide?
Former U.S. Federal Reserve Chairman Alan Greenspan has stated, “The European Union is doomed to fail, at least as a monetary bloc, because the cultural differences between northern and southern countries are just too vast to allow for one monetary policy” (quoted in “Greenspan: European Union Doomed to Fail,” Moneynews.com, Oct. 26, 2011).
The Wall Street Journal reports additional details about his view. Greenspan said the “Club Med” countries such as Greece and Italy have never abandoned a lifestyle that places enjoyment and easy living ahead of hard work. In contrast, he pointed out, the northern countries like Germany, the largest workhorse economy of the currency union, are far more prudent, competitive and long-term focused.
“ ‘Markets are basically saying that a number of these countries are competitively out of sync, and they cannot take on the challenges of the global economy,’ Mr. Greenspan said” (Javier David, “Greenspan: Europe’s Debt Crisis Comes Down to North vs. South,” Nov. 10, 2011).
The Economist magazine produced a 2011 white paper—titled After Eurogeddon? Frequently Asked Questions About the Breakup of the Eurozone— that agrees with Greenspan’s assessment:
“Firm predictions are tricky, but broadly a fracture between a strong northern ‘core’ and the weaker ‘periphery’ looks most likely. The process would, in our view, probably entail periphery countries breaking off individually to leave a ‘rump’ of northern countries still within a currency union. Once one peripheral country (say, Greece) left, all the other vulnerable countries would probably follow.”
The paper goes on to list the countries that are most likely to eventually leave as Portugal, Ireland, Italy, Spain, Malta and Cyprus.
It then states, “Up to ten countries could remain members of the euro: Germany, France, Austria, Belgium, Finland, Luxembourg, the Netherlands, Slovakia, Slovenia and Estonia (the last three all being small, open economies like Malta and Cyprus, but with healthier fundamentals.”
10-nation, world-dominating empire
As we have seen, many leaders and economists feel it is just a matter of time before the EU and eurozone will be forced to reshape themselves, with different groups going different directions at different speeds. A smaller, closer-knit, core eurozone group is likely to emerge as the leading economic powerhouse of Europe.
It is interesting to note that some see that core grouping condensing around 10 nations. While the final grouping of specific nations may well be different, students of Bible prophecy will grasp the significance of the number 10.
The prophet Daniel wrote extensively about “the time of the end,” the period just before Jesus Christ returns to establish His Kingdom on earth. Key in those events is a new global superpower to emerge, centered in Europe.
Daniel reveals some of the details of what that final superpower empire will be like. As related in Daniel 2, the Babylonian King Nebuchadnezzar saw a great image of a human figure in a dream. God revealed to Daniel that the segments of the image represented a series of empires that would arise.
The final one to come, a revival of the Roman Empire, is yet ahead of us. It was pictured by the feet of the image with 10 toes representing the grouping of 10 “kings” or leaders of nations who would form this final empire. The description given sounds ominously like the grouping of some of the nations in the EU today.
The toes were composed “partly of potter’s clay and partly of iron,” which indicated that “the kingdom shall be divided” and “be partly strong and partly fragile” (verses 41-42). Also, “just as iron does not mix with clay,” the components of this kingdom would not adhere firmly together for long (verse 43).
This grouping of 10 nations is described in a way that appears to indicate they preserve their individual cultures and political structures. Some will be much stronger than others. They will give their power and authority to what the book of Revelation describes as a ruthless, cunning, animal-like leader and system—”the beast” (Revelation 17:12-14 Revelation 17:12-14 12 And the ten horns which you saw are ten kings, which have received no kingdom as yet; but receive power as kings one hour with the beast.
13 These have one mind, and shall give their power and strength to the beast.
14 These shall make war with the Lamb, and the Lamb shall overcome them: for he is Lord of lords, and King of kings: and they that are with him are called, and chosen, and faithful.
American King James Version×).
This final system will lead the world to the brink of total destruction. But the good news is that Jesus Christ promises to return to save the human race from annihilation and establish His Kingdom over all nations (verse 14; Daniel 2:44 Daniel 2:44And in the days of these kings shall the God of heaven set up a kingdom, which shall never be destroyed: and the kingdom shall not be left to other people, but it shall break in pieces and consume all these kingdoms, and it shall stand for ever.
American King James Version×).
Keep your eyes on events in Europe! The end of this age is approaching more swiftly than most realize.