An oft-quoted refrain has that Americans think that 100 years ago is ancient history, while Europeans think 100 kilometers is another country. Both these factors came into play this week when a combination of Europe’s fear of projecting its power and America’s random amnesia contributed to a Russian march on Georgia with no opposition. The old jokes about Europe [1] appears more realistic by the day.

As of Thursday, at least the US had the good grace to admit its erroneous understanding of the Russian threat, with President George W. Bush ordering an aid airlift to Georgia. He will, however, find it lonely going in Georgia as his putative European allies have either contributed to the great sale of Georgia or have no stomach for engaging the Russian bear for any further conflicts.

French President Nicolas Sarkozy, who currently holds the rotating (“revolting” may be a better word, but we are getting ahead of ourselves here) chairmanship of the European Union, effectively signed over Georgia’s existence to the Russians by agreeing to the latter’s proposal for the continued presence of Russian “peacekeepers” in Georgia. This is the excuse being used by the Russians for their presence in the town of Gori, even as the military has kept Georgia’s capital Tbilisi firmly in its sights. More importantly, the accord brokered by the French makes no mention of Georgia’s territorial integrity, in effect allowing for a takeover of the breakaway South Ossetia by the Russians, at the very least.

While asking or begging for peace, no European leader has really come out with strong statements against the Russians. For their part, major European powers such as Germany seem willing to do anything to avoid upsetting the Russians just before winter; this is almost entirely due to the success of Russia’s energy policy or more simply the ability of the country to charge any arbitrary price it so chooses.

It was thus left to some of the newest entrants to the European Union, such as the Baltic states and Poland, to declare some degree of solidarity with the Georgians.

Georgia is a small nation on the Black Sea coast between Russia and Turkey, yet its strategic potential is evident, all the more so with both the US and Europe having to come to terms both with a belligerent Russia and an Islamic Turkey (see A Turkish theater for World War III Asia Times Online, July 25, 2008). Despite all that, much as the continent did nothing when Adolf Hitler marched into Czechoslovakia, it chooses to do nothing when Russia marches into Georgia.

More than energy is at stake. Europe realizes that its demographics have weakened beyond repair, to the point where its countries cannot fight any threat outside their immediate borders. Secondly, there is the issue of Europe itself being an artificial entity, held together by a common currency and unsustainable subsidies.

While the average French farmer would be happy taking his annual check from Brussels, he is unlikely to put on the battle fatigues and march to the defense of Poland from the Russians. The centuries-old habit of surrendering before firing a shot is more deeply ingrained into the French psyche than all of the empty European slogans ever could. Much the same can be said of the Spanish, Italian and Belgian contingents; while the Germans may well retain their combat instincts they are unlikely to ever march again on their own accord.

Sellout Brits

All of this though doesn’t count as the worst thing to have emerged this week. That particular “honor” should go to the British Prime Minister Gordon Brown, who appears to have negotiated late last year a surrender agreement on the side with Muqtada al-Sadr’s Shi’ite Mahdi Army in return for the remnants of the British army leaving the southern Iraqi city of Basra in one piece. That the agreement was put in place at all is bad enough, the fact that Britain’s allies were left uninformed until the last minute only compounds the poor show.

Exposed in British newspapers this week, the agreement casts a pall on the historical record of the proud British army. Defending the abject surrender to a terrorist group though, British officials were quick to point out that they lacked the “correct equipment”, which I take to mean referred not as much to the paucity of guns and bullets as it did to the absence of political will.

The reason is that increasingly isolated in Europe, Britain finally has bowed to demands from its pacifist neighbors; in the process turning its back on the US as well as the need to do the right thing in Iraq. No more “stiff upper lip” for them, instead we have been treated to the grand spectacle of an army turning tail at the merest mention of personnel losses.

This speaks volumes about where the rest of the continent will be headed soon. What possible hope is there for Europe when its only army of any substance – not to mention proven historical successes – behaves in such a fashion? The idea of the British hiding behind the coattails of Muqtada will provide an image for the next few generations of Muslims keen on taking over Europe. The latter will be convinced now more than ever that Europe will not even fight any concerted advance.

Declining economies

As if the news from the political and strategic fronts wasn’t bad enough, recent economic news from Europe has also been bad. The German economy declined by 0.5% for the second quarter, showing in its wake that any notions of the European economy being a stabilizing force against the destruction of the US economy were completely unfounded.

Other economies, including the French, have also showed poor data on both the production and consumption side. The main economies inflated by property price bubbles, such as Ireland and Spain, have fallen victim to the same forces affecting the US; namely, a deadly combination of falling asset prices and gargantuan leverage that has decimated the accumulated wealth of two generations, in turn hurting domestic consumption. (Even sales of beer have declined in Western Europe – people being unable to afford the latest Milanese fashion is one thing, but to forgo their favorite tipple is quite another matter altogether.)

Meanwhile, news from European banks [2] has turned out to be worse than expected. As the banks announced results for the first half of the year (on a side note, you have to admire their laid-back attitude, reporting results almost a month after their US counterparts) the sea of red ink threatened to overwhelm their capital bases.

It is noteworthy that European banks have more lenient accounting standards than their US counterparts and yet have recognized more losses since last year on the US subprime crisis than their cross-Atlantic counterparts. It boggles the mind to think about what would happen if these banks adopted American standards.

Even the mighty European Central Bank (ECB) last week signaled its decidedly compromised position by declaring a unilateral ceasefire in the war against inflation; that has been its sole policy plank for the past few years. The reason was the increasingly turbulent relationship between the ECB and the powers that be politically. For its part, the Bank of England also signaled that interest rates would remain stable, despite a sharp decline in house prices and retail sales, as its flexibility to cut rates had been undermined by the government’s excessive borrowings.

As I wrote in previous articles (see Euro-trash Asia Times Online, March 11, 2008) , the notion of these countries supplanting the US as the global growth engine was always suspect; this week the currency and other markets finally took cognizance of the facts and sent both the euro and and the British pound tumbling against the greenback. Equities have been sold off aggressively in Europe as investors finally realize the futility of even thinking that Europe could help diversify their exposure to US investments; on the contrary, their losses in Europe have been higher than those in the US.

While the fluctuations of currency and equity markets are hardly fodder for long-term strategic analysis, the fact that the patina of global goodwill has been lifted this quickly from Europe helped to highlight, once again, the dominance of market capitalism over any other form of economic management.

European weakness is thus not a passing fad; it appears to be a long-term secular decline from both a strategic and an economic perspective. Their sclerotic global standing is but a result of socialist policies that have helped push the best and brightest away from the region, leaving in their stead a bunch of subsidy grabbers and welfare cheats.

Flush with commodity wealth, both the Russians and the Arabs may be eyeing Europe for their expansionist policies. Thankfully for the Europeans, the latter group cannot muster anything more threatening than a bunch of camels at this point; at some stage in the next 20 years though that condition will change, especially if both Turkey and Pakistan are fully inducted into the fighting forces of the Wahhabi clans.

For now, that leaves Europeans contemplating coexistence with an increasingly belligerent Russia. With its economy doing rather well from the rise in oil prices as well as ongoing industrial development, Russia is putting itself in a position of strength. Unlike the sleepy bureaucrats in Brussels, the Russians probably recognize the above strategic positioning, particularly with regard to the Middle East; thus whatever is happening in Georgia and which could follow in Ukraine appears part of a well-thought-out strategy.

As I chart the “progress” of the world towards a World War III situation, it is not surprising that one of the preconditions of such an event – the emergence of a dominant consolidator of power in Europe – should now be happening, albeit from a source long thought dead in strategic terms. A Russia that takes on the mantle of empire in Europe has more in common with the US than it does with China or the Middle East over the long term.

1. My favorite European joke is “Heaven is a place where the police are English; the chefs are Italian; the car mechanics are German; the lovers are French and it’s all organized by the Swiss. Hell is a place where the police are German; the chefs are English; the car mechanics are French; the lovers are Swiss and it’s all organized by the Italians.”
2. Analysis is based on releases by banks in the UK, France, Germany and Switzerland.